- 8 months ago
- #considerthis
The government is proposing a major restructuring of the Employees Provident Fund under the 13th Malaysia Plan. The idea is to split EPF into two components:
flexible savings, which can be withdrawn anytime, and retirement savings, which will be paid out regularly until depleted. It's a bold move aimed at strengthening old-age income security, as Malaysia prepares to become an aged nation. But can a new hybrid model safeguard retirement income for the long term without overriding the rights of contributors who’ve saved throughout their working lives? On this episode of #ConsiderThis Melisa Idris speaks with Chai Sen Tyng, Senior Research Officer at UPM’s Malaysian Research Institute on Ageing (MyAgeing).
flexible savings, which can be withdrawn anytime, and retirement savings, which will be paid out regularly until depleted. It's a bold move aimed at strengthening old-age income security, as Malaysia prepares to become an aged nation. But can a new hybrid model safeguard retirement income for the long term without overriding the rights of contributors who’ve saved throughout their working lives? On this episode of #ConsiderThis Melisa Idris speaks with Chai Sen Tyng, Senior Research Officer at UPM’s Malaysian Research Institute on Ageing (MyAgeing).
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00:00hello and good evening i'm melissa idris welcome to consider this this is the show
00:15where we want you to consider and then reconsider what you know of the news of the day the government
00:20is proposing a major restructuring of the epf under the 13th malaysia plan the idea is to split
00:27epf into two components one flexible savings which can be withdrawn at any time um and two
00:35the income savings portion which will be paid out regularly until depleted now while this is still
00:41an idea under consideration it is a bold move aimed at strengthening old age income security
00:48as malaysia prepares to become an aged nation but can this new hybrid model deliver a retirement
00:55system that is fair and sustainable and the biggest question is will malaysians be open
01:00to such a reform joining me on the show is chai senting who is a senior research officer at upm's
01:07malaysian research institute on aging better known as my aging chai thanks so much for being back on
01:13the show with me today what did you make of the proposed um dual component epf structure that
01:19splits contributions into retirement savings and kind of a pension style payout is this a sound
01:25direction for reform in your opinion hi melissa i think it's long overdue would be the right word
01:33um and i think that we we should have this conversation a long long time ago i i believe
01:38there were some movements towards this idea 10 years ago but it was quickly shot down because there
01:45wasn't any appetite for it but i think it's good to take note of the term that is being used one is a
01:53retirement savings same old same old and the other one is retirement pensions and the choice of the
01:59word pension here is really pretty exciting for us because we know for many years that a lump sum payout
02:06is not sustainable but i believe that perhaps uh the correct way to view it is that it might not be a
02:14different account right from the offset maybe everything else remains the same but perhaps at the age of 55
02:21you know the withdrawal age there is going to be some kind of a minimum sum or minimum balance
02:28or a basic amount that is going to be kept or left behind for it to be converted into some kind of a
02:36pension payout another key missing ingredient is whether there will be a longevity risk or guarantee of
02:45sorts that uh the pension amount would last for a lifetime i think that's the the key pieces of this
02:53major announcement that we are all waiting for okay i i just want you to maybe help clarify something so
03:01what is the difference between stretching out someone's savings and building a system that is reliable
03:10and um offers some kind of lifelong income you talked about longevity risk or like longevity
03:16guarantee i'm wondering how the idea of um some sort of risk pooling or even income redistribution
03:23mechanisms might offer i don't know some form of guarantee for um the whole the life cycle given that
03:31this is what is central to a real pension system isn't it correct correct in in social protection circles
03:38we we use the term a pension replacement rate a pension replacement rate essentially is how much of
03:45your income after your working life you know your decumulation phase replaces your current income
03:54that's an ideal uh situation very rarely you can provide a proper uh pension replacement rate but
04:01what's happening with uh india singapore even malaysia where we share the same roots of provident fund
04:09system is that the other countries have moved to a pension like payout i use the word pension like
04:15you know in that sense because singapore cpf life when it started in 2009 uh it is maybe for like 15 20
04:23years uh it's like annuity program but uh they tinkered with it in 2014 15 and 16 and now cpf life is
04:33guaranteed by the singapore government to last a lifetime so you set aside an amount when uh your
04:40withdrawal age is reached and then that amount is converted into a uh a pension payout but what happens
04:49to your money and this is where the the beauty of the singaporean solution uh is you know we were just
04:54talking about this recently and i was saying that oh if we leave behind a minimum sum that money can no
05:01longer exist in a individual account arrangement because the money is going to be pulled with the rest
05:08of the pensions and um some people live longer some people live shorter so there will be some mechanism
05:14to autocorrect within the funds but what cpf live did was was even more uh i would say they really
05:23listened to the feedback of the people back then and they say that i will only risk pool the dividend
05:30portion the interest generated from the premium that you left behind for the monthly pension and i was like
05:39you know and i was like thinking all this wow how other people's uh retirement programs are being
05:46improved you know and evolved over the the years and over here in malaysia hardly anything but just
05:52for for the longest of time that's why we keep saying there's long overdue not because
05:57uh we don't have examples of solutions it's just that people don't like changes and uh the government or
06:04any government takes a huge risk in uh introducing pension reforms even if it is to make it more
06:10sustainable or fairer uh to all the contributors yeah well that's absolutely right and i think maybe
06:17that's where an understanding of behavioral economics comes into play here i mean even the best
06:21designed pension systems can fail if people don't trust them or don't want to use uh take that option
06:28how do you see this happening this is a clear policy dilemma for governments and epf how do um
06:35how do authorities or policy makers think about safeguarding retirement for the long term without
06:41overriding um the rights of the contributors who have saved throughout their lifetimes and may want
06:46that lump sum withdrawal i mean is there a way to design a system that that honors both yeah i i think
06:54this is the key compromise here uh on one hand you you need that government guarantee to say that if
07:01it is a pension then it should last forever right i mean but we can argue and debate about the amount
07:08uh we can also argue and debate about what should be the minimum sum left behind um but i would say that
07:15the real trick here is to actually help people understand that you are still going to get your lump sum
07:22withdrawal but if you don't save enough then you won't qualify for the pension at all we are
07:30looking at it from a different angle most people will feel that oh they are trying to lock my money
07:36up for another i don't know 15 20 years right but i think we have to help the people understand that
07:42this is actually a privilege if you have insufficient savings let's say lower than 150 000 let's say the
07:49threshold is 150 000 let's say you have less than that then perhaps you can just withdraw everything
07:56and take home with you because the pension benefit cannot be extended to you simply because there's
08:01insufficient density of savings so we have uh what we call a social welfare cash assistance program
08:10which is valued at about 600 ringgit a month so if the uh guaranteed pension minimum pension approach
08:19is less than a thousand ringgit for example then there's no point that we try and convert it into
08:25a monthly payout sum so the correct approach here is to help everyone understand that if we set the goal
08:33at 150 000 or 300 000 we can variate it easily because the guaranteed sum will be correspondingly
08:41lower so you can still have your lump sum amount that you if you have excess and you can do what you
08:47will with it but what we are trying to guarantee here that you don't lose everything uh if you spend
08:52it early depletions or whatever other risks that people have talked about all right okay so the there
08:58were other interesting things in rmk 13 that i wanted to talk to you about uh what were the
09:04initiatives that were related to aging and older persons in the 13th malaysia plan that stood out to
09:10you chai was there anything in particular yes um i think for the 30 malaysia plan as our director has
09:17released a statement on this as is it's really historical in a way because uh for the first time the term
09:24long-term care enters the lexicon it has never been there before and um the government actually
09:32promised to establish and set up a long-term care ecosystem which involves the public private and
09:38civil society sectors so um addressing these uh major uh what we call components of an aging society
09:47head-on i think this is like a long-term commitment because they also address issues about old age
09:52employment uh they also touched on housing um lifelong learning free training so while the details are
10:01yet to be fleshed out we think that the government has correctly taken up many suggestions and ideas
10:08in the national aging blueprints so we hope that uh there will be a broader uh stakeholder engagement
10:16process to get public feedback on what is the best way for us to achieve these outcomes right okay so
10:24looking ahead so again uh rnp13 is is a five-year kind of long term medium term plan and often short on
10:31details but in the coming um budget uh 2026 and the months that follow what is it that you will be looking
10:41out for in terms of how the ideas or the vision that was presented in rnp13 will be implemented or will be executed
10:52i think it's always about moving the pieces so that like when you have a budget speech it's going to contain
10:59more short-term measures and solutions so um what we are hoping to see is that uh the government's looking at
11:06uh what we call the healthcare and long-term care uh reforms holistically similarly looking at the social
11:14protection uh reform in a holistic manner so that pension uh reforms whether civil servants or private
11:21sector workers are looked at together so that they they form a coherence uh a program and narrative so
11:28that there are no gaps in between so i i think uh in the upcoming uh budget speech and as well as the
11:36years to come we will see how the government fine-tune some of these goals and visions and they will
11:43operationalize them in in time in due course but uh i i believe that um we are already seeing some early
11:50signs of this because in the last budget speech the government has already announced tax rebates for
11:57adult children paying for the long-term care costs of their parents uh aging parents so so it means that
12:04the government already recognized that there is has to be some kind of a structure for us to
12:08to promote a more home and community-based care so i i suppose it will come uh i know that the
12:15ministry of women is also working on a framework of sorts for the care industry so we will have quite
12:22a number of uh policies and programs coming up but again uh it's always an issue of public engagement
12:30uh talking to the industry players and working closely with them and perhaps we can even save
12:36some money public funds especially if we work closely with the uh industry players uh in terms of
12:43what we call uh regulatory structures so you know the industry can self-regulate as well so i think we
12:50we have to explore all avenues considering our current fiscal position so that it does not make it a costly
12:56affair wonderful chai thank you so much for speaking with me i appreciate your time chai something
13:01there from my aging at upm we're going to take a quick break here and consider this we'll be back with
13:07more stay tuned
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