KUALA LUMPUR (Oct 20): Malaysia has been ranked third among Asian retirement systems and 19th overall with an overall index value of 60.1, according to the Mercer CFA Institute Global Pension Index 2020.
Malaysia was listed together with the UK, Belgium, Hong Kong, the US and France in the Grade C+ band, with an index value of 60-65, in the index which compares 39 retirement systems in the world.
The C and C+ grades describe a system that has some good features, but also has major risks and/or shortcomings that should be addressed. Without these improvements, its efficacy and/or long-term sustainability can be questioned.
The index, released today, said Malaysia’s overall index value fell slightly, from 60.6 in 2019 to 60.1 in 2020, due to several small movements in the sustainability sub-index.
Meanwhile, of the study’s three sub-indices, Malaysia scored highest for integrity (78), followed by sustainability (58.6) and adequacy (50.1). The global average sat at 71.3 for integrity, 50 for sustainability and 60.8 for adequacy.
The Netherlands and Denmark retained the first and second places respectively and the coveted “A” grade.
Mercer Institute said the impact of Covid-19 on the provision of future pensions around the world will be negative due to reduced contributions, lower investment returns and higher government debt.
The report said Malaysia’s retirement income system is based on the Employees Provident Fund (EPF) which covers all private-sector employees and non-pensionable public-sector employees.
Under the EPF, some benefits are available to be withdrawn at any time (under pre-defined circumstances, including education, home loans or severe ill health) with other benefits preserved for retirement.
Mercer said the overall index value for the Malaysian system could be increased by:
- Increasing the minimum level of support for the poorest aged individuals
- Raising the level of household savings and lowering the level of household debt
- Introducing a requirement that part of the retirement benefits must be taken as an income stream
- Increasing the pension age as life expectancy continues to increase