KUALA LUMPUR, Dec 5 — Malaysians could see their retirement savings increase by 54 per cent when the Progressive Wage Policy kicks in next year, the Employees Provident Fund (EPF) said.
Balqais Yusoff, head of EPF’s Strategic Management Department, told Sinar Harian in a report published today that its members' savings have the potential to grow to RM64,500 by the age of 30, and RM512,500 by the age of 55, with a projected annual salary increase of 3 per cent.
“This is equivalent to a retirement income of RM2,100 per month. Annual salary increases can boost retirement savings by 54 per cent.
“If employers use the Progressive Wage Policy incentive of RM200 per month to increase basic wages, the member's savings will increase to RM73,100 at the age of 30 and RM580,500 at the age of 55.
“This is equivalent to a retirement income of RM2,400 per month, nearly reaching the estimated minimum expenditure for an elderly person in the Klang Valley of RM2,500 per month according to the MyBudget study by the Social Welfare Research Centre, University of Malaya,” she was quoted as saying.
She added that factors influencing the extent of EPF members’ fundamental savings include the monthly incomes of employees, sustained employment and contributions, EPF dividend rates, and refraining from making withdrawals from Account 1.
“At present, the EPF basic savings quantum at 55 years old is RM240,000 in a member's Account 1. This is equivalent to a monthly income of RM1,000 for 20 years. For a member aged 30, the current basic savings quantum is RM35,000.
“Based on EPF's internal estimates, a member who is 18 years old and earns a minimum salary of RM1,500 per month will have savings of RM54,800 at the age of 30 without any annual salary increase. At the age of 55, the member will have savings of RM333,300, equivalent to RM1,400 per month for 20 years."
“This means that if members contribute consistently and do not leave the formal sector, they can achieve the basic savings quantum. However, even if members have achieved the basic savings quantum, RM1,400 is lower than the Poverty Line Income,” she was quoted as saying.
Balqais also noted that the effective execution of the trial initiative for the Progressive Wage Policy, beginning in June next year, would raise the EPF's fundamental savings goal from RM240,000 to RM340,000.
“EPF uses the minimum pension for civil servants, which is RM1,000 per month, as a benchmark in setting the basic savings level. The current basic savings of RM240,000 is based on an estimated lifespan of 20 years after retirement (or 75 years).
“The EPF basic savings rate is reviewed every three years to ensure that the rate is in line with the economic conditions and the current cost of living. Therefore, the EPF will raise the basic savings quantum from RM240,000 to RM340,000, which will be implemented in phases.
“This quantum is based on the MyBudget study, taking into account 60 per cent of the minimum expenditure for an elderly person in the Klang Valley, which is RM2,520 per month,” she told the Malay daily.
The government announced the voluntary implementation of the Progressive Wage Policy will start in June 2024 with the participation of 1,000 employers.
Four million employees who currently earn monthly salaries ranging from RM1,500 to RM4,999 are eligible to participate in the programme.
Economy Minister Rafizi Ramli said that the government would offer cash incentives ranging from RM200 to RM300 for each employee from participating companies.
In August, EPF suggested that Malaysians should aim for a basic savings of at least RM35,000 by the age of 30 to meet the minimum amount required for sustaining life after retirement.