In debating retirement age, solve the retirement savings issue too — Mohammad Abdul Hamid

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SEPTEMBER 7 — Amidst the ongoing debate regarding the retirement age extension, I would like to draw the attention of policymakers, politicians as well as the general public to one of the main issues, which is the retirement saving among EPF members (private sector/non-pensionable public sector employees and the self-employed) and those without any old-age financial protection.

In 2015 alone, nearly 80 per cent of EPF members who turned 55 years would not have enough savings in their EPF accounts to live above the poverty line.

Based on a recent survey conducted in April 2019, my research shows that two thirds of EPF members (66.7 per cent) in the 51-55 years age bracket do not have sufficient savings of RM240,000 for retirement, despite approaching the age when members can opt for full withdrawal. 38.1 per cent of respondents in this age bracket only have RM60,000 or less in their EPF accounts (as at 31st December 2018).

Additionally, workers with over 20 years EPF membership are vulnerable too, as 19.7 per cent of them only have RM60,000 or less in their EPF accounts.

To address this issue, I recommend the use of behavioural insights/nudge (introduced by Richard Thaler, 2017 Nobel Prize winner in economics), such as a percentage increase in employee’s contribution whenever an employee received a pay raise. This should be set as a convenient default (automatic) option to improve retirement savings, but employee can still choose to opt-out if he/she so decides.

This approach, designed to improve decision-making, must be used with other behavioural interventions recommendations, thus offering cost-effective, practical and innovative solutions alongside existing policies.

It is also recommended that instead of using the minimum wage as benchmark for the lower income groups, a push for employers to adopt the concept of living wage should be considered, taking into account the variations of cost of living based on household size, geographic locations etc.

* The author is a Master of Public Policy graduate from the University of Malaya, MPhil graduate from the University of Cambridge & YDP IKRAM Bandar Tun Razak. The author presented his policy paper research, “An analysis of retirement savings among EPF members” at the International Conference on Emerging Issues in Public Policy: Global Trends & Projections on 6th August 2019 in Kuala Lumpur.

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.

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