The case for extending Malaysia's retirement past age 60

A group of senior citizens is seen practising Taichi at a park in Bukit Jalil, Kuala Lumpur. ― Picture by Saw Siow Feng
A group of senior citizens is seen practising Taichi at a park in Bukit Jalil, Kuala Lumpur. ― Picture by Saw Siow Feng

KUALA LUMPUR, April 22 ― As Malaysians live longer, there have been calls to raise the retirement age past the current 60 to at least 65.

Malaysian Trades Union Congress (MTUC) secretary-general J. Solomon is one such advocate. He believes the move is not only feasible, but will boost economic growth as Malaysians who work longer would have stronger spending power.

“One must be mindful that many great leaders are above the age of 60 and the recent suggestion by the former Chief Justice to extend the judges' retirement age from 66 to 70 proves they can still serve and serve well,” he told Malay Mail Online when contacted.

He argued that older workers tended to be more loyal to a company and had more experience and skillsets even as he acknowledged that age does not necessarily equal productivity or adaptability.

Solomon also acknowledged concern that a higher mandatory retirement age would also result in fewer job opportunities for younger Malaysians, but he was confident that both these issues could be overcome by expanding the range of jobs and retraining older workers.

Besides, he pointed out that many continue to work past the official retirement age, due to inadequate savings and the need to financially support their children even after retirement.

“The younger generation should welcome the extension of retirement age as it will allow their elders to be self-sustainable. Since even the current income of the many younger generation is not sufficient for themselves, how will they then care for their elders?” he posed.

Data from the Department of Statistics shows that the average life expectancy for Malaysians have risen over the years, from 63.1 and 66 years for men and women in 1966 to 72.5 and 77.4 years respectively as recent as 2015.

The 60-year-old threshold for retirement in the private sector kicked in almost four years ago when the Minimum Retirement Age Act took effect. Before that, they retired at 55. For government servants, the minimum retirement age was gradually raised from 55 to 56 in 2001 before increasing to 58 in 2008 and 60 in 2012.

But working beyond 60 is not unheard of in Malaysia. Government data shows 138,900 of the 5.249 million employed persons in 1982 were in the 60-64 age group, with those falling under this age group in 2015 accounting for 389,600 of the 14.067 million employed persons in the country. In proportion, it has grew marginally from 2.65 per cent to 2.77 per cent in this 33-year period.

Keep it optional

Solomon said that MTUC felt there should be further study on extending the retirement age.  Employees should then have an option to retire earlier if the extended age is made law. The higher retirement age should also apply to both the private and public sector, he said.

Malaysian Employers Federation executive director Datuk Shamsuddin Bardan too was quite receptive to the idea of extending the retirement age to 65, but said it should not be mandatory; instead he suggested workers’ continued employment beyond 60 “on a voluntary basis”.

He believes raising the retirement threshold mark benefits the government in labour planning and reducing Malaysia’s reliance on foreign manpower, especially in the services sector.

Having older workers in more labour-intensive sectors like construction might even be feasible if more companies adopted the use of the Industrialised Building System, a mechanised and automated system where pre-made building components from factories are assembled on site, he said.

He suggested voluntary employment beyond 60 to be a national policy, adding that the government could offer double tax cuts for employers and income tax exemptions to those still working after 60 as incentives.

But there were also drawbacks to keeping older workers in employment longer. Shamsuddin said it would be harder for younger workers to enter the job market when the positions were already occupied.

He cited Bank Negara Malaysia’s Annual Report 2016 released last month, which estimated the 2015 jobless rate among 15 to 24-year-olds at 10.7 per cent, 3.5 times the national unemployment rate of 3.1 per cent for the same year.

“The other thing is certainly of course we have some issues with older employees because they tend to be more sickly and medical costs can be higher to employers,” Shamsuddin said,

Financial sufficiency

Shamsuddin acknowledged that working past 60 can help senior citizens feel more secure about their retirement savings, but at the same time, felt Malaysians need to relook how they manage their Employees Provident Fund (EPF) savings.

“This is where perhaps the culture of saving for retirement has to change, and you look at our EPF, for example we are withdrawing EPF just like savings accounts, not only for retirement.

“Worse still is we can withdraw all savings at 55 and still continue up until 60. Obviously the five years' contribution is not going to be enough when they reach 60. Your lifespan will be 15 years to 20 years more, so with savings of five years, actually you can't carry through,” he said.

The EPF, meant to cushion workers in their golden years, has become sort of a backup piggy bank for workers to make withdrawals for other purposes, such as buying a house, paying for their education and medical needs.

Shamsuddin suggested that the current full withdrawal age of 55 be raised to 60, in line with the current retirement age.

In January, EPF introduced a new account called Akaun Emas where savings from earnings during ages 55-60 would only be withdrawable at age 60.

The EPF too cautioned last year that the minimum savings amount Malaysians will now require for their basic needs for the next 20 years after age 55 is RM228,000, up from the previous basic savings target of RM196,800.

Solomon said the current EPF withdrawal practice should be maintained. He said workers would be encouraged by MTUC to only make full withdrawals at 65 if the retirement age is extended, but they need to have the option to take out funds earlier due to high living costs.

The Congress of Unions of Employees in the Public and Civil Services, which for the past two years had advocated raising the retirement age from 60 to 62, declined comment for this article.

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