KUALA LUMPUR: Malaysia’s retirement system reform via the Employees Provident Fund (EPF) has been recognised by the World Economic Forum (WEF) as a model for emerging economies.
In its white paper, Future-Proofing the Longevity Economy: Innovations and Key Trends, the WEF highlighted EPF’s strategies that balance sustainability, intergenerational equity, and inclusivity.
“These reforms offer insights for countries seeking to modernise their retirement systems amid shifting demographic and economic conditions,” it said.
The EPF allows partial withdrawals for housing, education, and medical needs, offering flexibility while preserving long-term savings. During the pandemic, Malaysia temporarily allowed additional withdrawals, raising concerns over future adequacy.
In 2024, the EPF introduced a three-account structure: 75 per cent for retirement, 15 per cent for conditional withdrawals, and 10 per cent for a flexible emergency account.
Initiatives like i-Saraan, which matches voluntary contributions from informal workers, have gained traction. The government now matches 20 per cent of contributions (up to RM500 annually), boosting participation by 53 per cent—from 380,000 in 2023 to 580,000 this year.
Malaysia is also exploring reforms to improve financial literacy, expand mandatory coverage to informal and migrant workers, and ensure portability for those shifting between formal and informal sectors.
With a legislative roadmap in place, the country aims to close the 40 per cent coverage gap in formal retirement access.
However, informal sector inclusion remains a key hurdle.
The WEF noted that sustainable financing mechanisms—such as adjusting contribution rates, linking retirement age to life expectancy, and diversifying investments—are crucial to safeguard future solvency.
Policies to expand portable retirement benefits and incentivised micro-pension schemes could also secure gig and informal workers. Meanwhile, auto-enrolment in retirement plans has shown to significantly boost participation and long-term savings, especially for low- and middle-income earners.
“Behavioural nudges and mandatory enrolment can drive greater financial security,” the WEF added. — BERNAMA
