KUALA LUMPUR - The World Bank Group today launched the paper "Should Malaysia expand its social pension? Global evidence, design issues and options” to support the government in shaping policy reforms under the National Ageing Agenda.
World Bank country manager Judith Green said Malaysia is undergoing a rapid demographic transition, and the country is projected to transition to an aged society by the mid-2040s and then to a super-aged nation by the mid-2050s.
"This transition from an ageing society to a super-aged nation will take place at a pace similar to that observed in other Asian countries such as China and Japan, but much faster than in other developed countries," she said in her welcoming remarks at the launch here today.
Green said on average, the accumulations of Employees Provident Fund (EPF) numbers are low and typically run down within three to five years of withdrawal.
In these circumstances, she noted that social pensions are the last line of defence and safety net and indeed sees a growing number of countries introducing or expanding their social pensions given similar challenges.
"Global evidence has shown that social pensions have a positive impact on reducing poverty. Malaysia is not only facing demographic transition challenges, but there are valuable lessons that can be learnt from global experiences in redesigning and expanding social pensions,” she said.
Meanwhile, World Bank Group senior economist Matthew Dornan said wider social pension coverage would complement the country’s existing contributory schemes, such as EPF and pension benefits for civil servants, which currently do not reach all Malaysians or ensure adequate retirement savings.
"Social pensions, which are tax-financed support for older persons, have been successfully implemented in about 100 countries globally. They serve as an important safety net for those with inadequate or no retirement savings,” he said.
Dornan noted that Malaysia already has a system in place through the Bantuan Warga Emas, but it currently benefits only about four per cent of older individuals.
He said the paper’s findings examine whether the scheme should be expanded to cover more seniors and explore potential policy trade-offs.
However, he said fiscal limitations remain the main barrier to expansion, and that adjustments such as raising the eligibility age or targeting support primarily to lower-income groups could make the initiative more sustainable.
"Design choices such as who qualifies, at what age, and how much support to provide will determine the fiscal impact. Other countries like Thailand and Chile have used different models to balance cost and coverage,” he said.
Dornan added that social pensions should be viewed as part of broader pension reforms to ensure all Malaysians have sufficient income in old age.
"Incremental expansion is feasible if the design is carefully managed. In the longer term, increasing Malaysia’s fiscal space, given its low tax-to-gross domestic product ratio, will be essential to sustain stronger social protection and public services,” he said. - BERNAMA