The State of the Nation: Recasting the age 55 EPF withdrawal into a lifetime pension promise

Monday 12 Oct 2026

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This article first appeared in The Edge Malaysia Weekly on October 5, 2026 - October 11, 2026

AS the life expectancy of Malaysians increases, Putrajaya is aiming for at least 60% of Employees Provident Fund (EPF) members to meet the Basic Savings benchmark of RM390,000 by age 60 by 2030. However, the government acknowledges that many Malaysians still risk outliving their savings during a retirement that could stretch across 20 to 25 years. Prime Minister Datuk Seri Anwar Ibrahim said this in a speech delivered by Finance Minister II Datuk Seri Amir Hamzah Azizan at the International Social Wellbeing Conference (ISWC) 2026, themed “The Long Horizon”, in Kuala Lumpur on Sept 29.

That retirement or post-formal employment period could well be much longer. For someone starting work between the age of 18 and 21, a retirement age of 55 or even 60, combined with the possibility of living past 100 years, means that 34 to 42 years of working life may need to support a retirement period of at least 40 to 45 years — rather than the traditional 20 to 25 years.

This already puts a strain on the public pension system, which supports not only civil service pensioners but also their eligible dependants. In July, Public Service Department director general Tan Sri Wan Ahmad Dahlan Abdul Aziz visited 102-year-old Ong Siew Choon, Negeri Sembilan’s oldest government pensioner who retired in 1979, which was 47 years ago.

Statistically, Malaysian Chinese women live the longest among cohorts but they are not the only ones living longer. The late Tun Dr Hasmah Mohamad Ali lived to be 100 years and 11 weeks old. Her husband Tun Dr Mahathir Mohamad — who is a year older — reportedly said he hadn’t expected her to leave that morning. Meanwhile, billionaire Robert Kuok will turn 103 on Oct 6.

At ISWC, Wong Yan Jun — deputy CEO of Singapore’s Central Provident Fund Board (CPF) — showed a photo of his 107-year-old grandmother when sharing how the city state supports a super-aged society, with emphasis on self-reliance and voluntary savings as a cornerstone of social security.

Reality check on adequacy

Anwar and Amir Hamzah had both previously stated that four in 10 EPF members are on track to achieve the recommended Basic Savings benchmark by age 60. The elephant in the room, however, is the fact that Malaysia continues to allow full lump-sum withdrawal of EPF savings at age 55, despite research showing that most people use up those savings within five years. Put another way, one may be on track at age 55 but off track at age 56 upon full withdrawal.

D3P Global Ltd CEO William Price told ISWC delegates that the issue of lump-sum withdrawal at age 55 from the EPF “has been persistent” and remains so today — 15 years since his first visit to Malaysia — even though the EPF has grown into one of the world’s largest provident funds. The pension and retirement policy expert reminded the audience of the importance of transitioning pension systems from asset accumulation models to sustainable income-providing models to prevent old-age poverty. He says a big problem in pensions is that you achieve too little by trying to achieve too much — whether it is housing, healthcare or education — because “the focus on assets almost blinds us into thinking that we have a lot of money”.

A shift towards focusing on how much income this accumulated retirement savings pool will generate in old age is the necessary “reality check” that is currently missing, Price added.

Lifetime monthly payout

CPF’s Wong said Singapore introduced an annuity programme, called the CPF Lifelong Income for the Elderly (CPF LIFE), in 2009 that gives lifelong monthly payouts to address the risk of Singaporeans outliving their retirement savings. The government realised this in 2007 and acted on it by encouraging CPF members to save at least S$60,000 for enrolment into CPF LIFE, ensuring a monthly payout from age 65 for the rest of their lives.

For example, someone turning 55 in 2026 with the CPF’s S$110,200 (RM352,121) Basic Retirement Sum stands to have S$170,100 in their retirement account by age 65. According to information on the CPF Board website, they can expect to receive S$950 per month for life if they opt to start payouts at age 65, or S$1,280 per month if they choose to defer until age 70.

Someone with only S$50,000 at age 55, however, should have S$82,400 by age 65 if the money is left to compound, and be eligible for a S$490 monthly lifetime payout if starting at age 65 or S$670 monthly if starting at age 70. The current maximum is the Enhanced Retirement Sum of S$440,800 at age 55 in 2026, which should compound to S$650,100 by age 65 to give S$3,440 per month for life if starting at age 65, or S$4,580 per month for life from age 70.

The Edge had previously written about CPF LIFE after EPF CEO Ahmad Zulqarnain Onn told us in an interview that “converting at least [RM390,000] basic savings to an income stream is a high priority, [as is] expanding coverage to informal or categories of workers who are not today contributing to EPF”. Thus far, illustrations provided by the EPF are for a period of 20 years rather than a lifetime. (Scan the QR code to read “Uphill task to guarantee lifetime monthly payout for EPF members”, Issue 1588, Aug 18, 2025.)

Now that EPF Account 3 allows anytime withdrawals, it remains to be seen if Putrajaya will choose to raise the age of lump-sum EPF withdrawals from 55 to 60 to align with the retirement age. This policy change could target members below 30 or future workforce entrants — who still have ample time to plan — to bolster younger cohorts’ retirement savings beyond age 55. This needs to work alongside higher wages (see sidebar).

Experts, including those at Universiti Malaya’s Social Wellbeing Research Centre, have long called for a tax-funded old-age basic income scheme to alleviate old-age poverty, starting small and increasing over time.

Price — who noted how he had to adjust his chart to begin at age 50-55 for Malaysia compared with 60-65 for Organisation for Economic Co-operation and Development countries — said there is “no country in the world that has decent old-age, anti-poverty [measures] without non-contributory pensions. Some people need to be given something. The method differs [but] you need public and private”.

The right formula for Malaysia needs to be carefully thought out for the long haul, as what is given cannot be taken back without political pain and an arduous journey for policymakers and executors. What is clear is that the more Malaysians who have old-age savings, the less the burden on government coffers.

That is perhaps why Putrajaya backs measures supporting the re-employment of people over 60 while deciding not to raise the formal retirement age for now. Price encourages retirees to remain mentally and physically active, as it is “not healthy” to stop, even if they no longer need to work for money.

A passionate Tan Sri Dr Jemilah Mahmood elicited applause from the audience when she declared having “no plans to retire”, despite being two months shy of 67. Earlier, she had warned ISWC delegates that the healthcare and biogeographical risks of climate change could be a material investment risk to pension funds, rather than just an ethical issue.

Malaysia needs more of this spirit for its people to thrive in their old age.

Don’t penalise high-income earners when lifting EPF contribution for lower-wage cohorts

Former Employees Provident Fund CEO Tan Sri Shahril Ridza Ridzuan’s suggestion that employers raise their EPF contribution level to help lift the retirement savings of lower-wage earners raised eyebrows as it called attention to his illustration that employers could hypothetically contribute only 4% for workers earning above RM10,000 to compensate for the higher “say 15% or 16%” contribution for those earning below RM5,000 a month.

Speaking at EPF’s International Social Wellbeing Conference (ISWC) 2026, “The Long Horizon”, on Sept 30, Shahril, 56, also noted that raising the EPF contribution rate would not solve the retirement adequacy gap if wages remain low for the vast majority of workers.

“The problem has always been that for the last 50 to 60 years, wages have not grown fast enough in Malaysia. When your base is small, no matter how big the contribution rates, you are not building your retirement savings fast enough,” says Shahril, who was also formerly managing director of Khazanah Nasional Bhd and is currently chairman of Axiata Group Bhd (KL:AXIATA).

Put another way, what he is really saying is that higher wages are necessary for more people to have a better chance at saving for retirement. “We need to have much better progressive policies to make sure the minimum wage keeps up.”

Observers agree that a gradual increase in the minimum wage at fixed intervals, which would allow businesses to plan in advance, would be the better option as there is evidence of lower-income earners not having enough income to cope with the rising cost of living.

Research has shown that more than 70% of EPF savers who prematurely withdraw retirement savings from EPF Account 3 are doing so to pay for their daily necessities or repay debt. That issue of low wages and low capacity for saving also causes a smaller savings pool that reduces the power of compounding interest for the people who probably need it the most.

That is perhaps why Shahril is not in favour of tiered EPF dividends. “Instead of differentiating yields for those with higher balances in EPF and lower balances, what you should do is to start capping contributions of high-income earners to reduce the balance sheet,” he said.

Observers reckon that tiered dividends could spark withdrawals among EPF members with higher savings, potentially affecting the local equity market as well as demand for government bonds.

“The contribution rate suggestion was probably to spark a discussion about how to redress the imbalances between low account balances versus high earners,” says an observer, acknowledging that many moving parts need to be considered before policy can be implemented, including the fact that a large part of the economy has yet to move away from low-cost models to higher-value ones.

Cutting employers’ EPF contribution rate for higher-income earners “is like a higher tax on higher wage earners — a disincentivising welfare system”, says another observer.

Lee Heng Guie, executive director of the Socio-Economic Research Centre (SERC), a think tank of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), recommends careful consideration before making any changes to the minimum wage and EPF contribution rates.

Noting that employers’ contribution to EPF on one’s full salary at 12% or 13%, or even 19%, is deemed part of the overall remuneration package of Malaysian employees during salary negotiation, Lee says there could be unintended consequences on higher-income workers as it is effectively a salary cut if employers do not compensate the affected employees with higher wages, bonuses or other benefits-in-kind. “It could stall career progression or even cause brain drain,” he adds, noting that higher-income workers already pay higher tax rates.

Lee is also in favour of well-communicated and scheduled increases in the minimum wage as well as initiatives by government-linked companies (GLCs) to pay a “living wage” of at least RM3,100.

Employers are already compelled by law to contribute 13% of the salary for those earning below RM5,000 and 12% for those earning above RM5,000 to their employees’ EPF savings as part of the overall remuneration package for private wage earners.

The rate was last changed 15 years ago. Employers’ EPF contribution rate was previously 12% for all wage earners until January 2012, when a higher rate was introduced for those earning below RM5,000 a month — a move that reportedly benefited 5.3 million wage earners, or 92% of the EPF’s active members back then.

Employers enjoy a tax break for EPF contributions up to 19%. Their EPF contribution rate was raised from 5% to 7% in July 1975, to 11% in December 1980 and to 12% in January 1993 (until December 2011), EPF data shows.

Employees’ contribution to EPF has been unchanged at 11% since January 1996, save for temporary decreases during crises, the last being the Covid-19 pandemic when the statutory rate was reduced to 7% between April 2020 and December 2020 and 9% between January 2021 and June 2022. Employees are free to contribute up to 100% of their salary to EPF, on top of the RM100,000 annual voluntary contribution ceiling.

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