Golden years in peril, Malaysians, especially the Bumiputera, face grim retirement future - EPF

SHAH ALAM - Malaysia is confronting a chilling retirement reality as potentially half of the 9 million Bumiputera members of the Employees Provident Fund (EPF) may have to make do with less than RM20 per day to live during their golden years.

EPF chief strategy officer Nurhisham Hussein said while some Bumiputera EPF members -- who are predominantly Malays -- will have sufficient retirement savings, many of them will not.

“We have something like 14 per cent of EPF members who are reaching the age of retirement or at 55 -- the withdrawal age [of EPF] -- who have less than RM1,000,” said Nurhisham in the latest episode of Sinar Specials, ‘The Malay Retirement Dilemma Unveiled.’

However, Nurhisham also pointed out that apart from Bumiputera and the Malays, other races are also experiencing the same crisis of inadequate retirement savings.

“It’s actually a Malaysian problem. Although Bumiputera tend to have less than other communities, others are also facing the same problem.

“For Malaysian Chinese, the median is RM15,000. The Indians are a bit lower, at RM11,000, so, even they have the same issues in terms of not having enough savings for retirement,” he said.

Several factors contributed to this dire situation.

A significant portion of the workforce in Malaysia, Nurhisham explained, operated within the informal sector, including freelancers and gig workers who often experienced inconsistent contributions to their retirement savings, hindering the accumulation of a substantial nest egg.

“They might be working as a salary worker for a while but then they leave and go to the informal sector, they become freelancers, gig workers, so their savings does not accumulate,” he said.

Another challenge lies in the career trajectories of women in Malaysia.

According to Nurhisham, many women enter the workforce but subsequently leave to start families, as a result, their accumulation phase for retirement savings is significantly shorter, leaving them with less financial security in retirement.

“They get married, start a family, leave the workforce and they don’t come back, so, their accumulation phase is only for a few years, so the savings that they can actually get is quite low,” he added.

Low wages also play a pivotal role in such a crisis.

“Everybody knows this, the salaries in Malaysia are quite low. If you have low wages, obviously you can’t save much,” Nurhisham remarked, bluntly.

He explained that while the median wage in Malaysia has recently improved to RM2,500 - RM2,600, this remained insufficient for robust retirement savings, adding that even with a 23 per cent contribution rate to EPF, many struggle to amass enough savings.

And despite the introduction of a minimum wage in 2013, older workers, said Nurhisham, who entered the job market several decades ago did not have the benefit of this policy and as a result, the situation remained dire for those nearing retirement.

“Just to illustrate, if you’re earning more than RM5,000 today, you are already a T20.

“A T10 is just a little under RM10,000, so even if you’re earning RM10,000, you’re at the upper end of the income distribution but that does not mean you can actually accumulate a whole lot of savings,” he explained.