Retirement Crisis in Malaysia is Here | Retirement Planning Series

lipkarlock Tuesday, August 05, 2025



Malaysia might be facing retirement crisis.

Based on this Youtube video, here are the key points discussed by Professor Geoffrey Williams regarding Malaysia's retirement crisis:


A. The Current State of the Crisis

  • It's Not a Ticking Time Bomb, It's Already Here: Professor Williams states that the pension crisis is not a future problem but a present reality. While it hasn't completely blown up, the crisis is "already with us" and requires immediate action.

  • Widespread Inadequacy: The crisis affects almost everyone, with 97% of Malaysians lacking sufficient funds for an adequate retirement.

  • Low EPF Savings: Only about 20% of all EPF (Employees Provident Fund) members have the minimum required savings of RM240,000 for retirement, which is calculated to provide a pension of RM1,000 per month for 20 years.

  • Poverty-Level Pension: The minimum pension of RM1,000 per month is considered below the food poverty level, and due to inflation, it will not be enough to live on in the future.





B. Causes of the Crisis

  • Low Incomes: The fundamental reason for the crisis is decades of low incomes in Malaysia. Even with consistent contributions, the low base amount doesn't allow savings to accumulate fast enough for retirement.

  • Unfair Wealth Distribution: Malaysian workers receive only one-third of the value they create, with the other two-thirds going to employers. This contrasts sharply with countries like Singapore, the US, and the UK, where the split is closer to 50/50, which helps suppress salaries.

  • EPF Withdrawals during the Pandemic: The government's policy to allow withdrawals from EPF savings was an "absolute hands-down disaster". This policy wiped out the savings of millions and made it impossible for older individuals (ages 40-50) to rebuild their retirement funds, as there was no government scheme to replace the lost savings.





C. Potential Solutions and Government Actions

  • New EPF Account Structure: Professor Williams praises the new three-account system as a "very smart" move by the EPF. The new structure increases the main retirement account to 75% of contributions, while creating a flexible 10% account for withdrawals, which helps rebuild savings more quickly over time.

  • The Caring Economy: Malaysia needs to shift its focus from "boys' toys" like flying cars to investing in the caring economy, which involves training more care assistants to look after the aging population. This sector has the potential to create millions of jobs that are resistant to technological replacement.

  • Alternative Retirement Options: The professor discusses alternative ideas, such as reverse mortgages, where retirees can sell their property back to a bank for a monthly income. While not culturally popular, it offers a way to utilize housing assets for financial security. He also encourages individuals to pursue multiple income streams and "gig economy" work to supplement traditional wages.





D. EPF Savings as at 31 December 2023






Based on the provided data table, here is an analysis of the active EPF members' savings profile as of December 31, 2023.


Overall Data Analysis

  • Total Members and Savings: The table represents a total of 8,524,975 active members with a combined total savings of approximately RM 867.25 billion.

  • Savings Distribution: The data reveals a highly skewed distribution of savings, with a large concentration of members in the lower savings brackets.

    • The largest single group is members with less than RM 1,000, totaling 364,682 members.

    • Looking at the low-to-mid range (e.g., up to RM 100,000), a significant portion of members fall within this category. The number of members decreases as the savings amount increases.

  • Gender Comparison:

    • There are more male active members (4,646,149) than female active members (3,878,826).

    • Male members generally have higher average savings. For example, in the top savings bracket, there are more male members than female members.


Analysis of Members with > RM 1 Million

This group represents the highest tier of savers and shows a significant concentration of wealth.

  • Number of Members: There are 90,334 members with savings exceeding RM 1 million.

    • This is a very small fraction of the total active membership: approximately 1.06% of all active members fall into this category.

    • Within this group, there are more male members (59,275) than female members (31,059).

  • Total Savings: The total savings for this group is RM 157.3 billion.

    • This amount is over 18% of the total savings of all active members (RM 157.3 billion / RM 867.25 billion).

  • Average Savings: The average savings for a member in this group is exceptionally high. Dividing the total savings by the number of members gives an average of approximately RM 1,741,200.


Conclusion

The data illustrates a significant wealth disparity among active EPF members. A small percentage of the membership (just over 1%) holds a disproportionately large share of the total savings (over 18%). Conversely, the vast majority of members have much smaller balances, with a large number of individuals at the lowest end of the savings scale. This reinforces the findings from the video about the challenge of low retirement savings for the average Malaysian worker.





Reference Link:


Happy Investing! 😉
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