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KUALA LUMPUR (Oct 20): Malaysia 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 USA and France in the Grade C + band, with an index value of 60-65, in the index comparing 39 retirement systems in the world.
Grades C and C + describe a system that has some good features, but also has significant risks and / or shortcomings that need to be addressed. Without these improvements, their long-term effectiveness and / or sustainability may be questioned.
The index, released today, said the value of Malaysia’s overall index 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 three sub-indices in the study, Malaysia scored highest for completeness (78), followed by sustainability (58.6) and adequacy (50.1). The world average was 71.3 for integrity, 50 for sustainability and 60.8 for adequacy.
The Netherlands and Denmark retained first and second place respectively and the coveted “A” rating.
The Mercer Institute said that the impact of Covid-19 on future pension provision around the world will be negative due to reduced contributions, lower investment returns and higher public debt.
The report said that Malaysia’s retirement income system is based on the Employee Provident Fund (EPF) which covers all non-pensionable private sector employees and public sector employees.
Under the EPF, some benefits are available to be withdrawn at any time (under predefined circumstances, including education, home loans, or serious illness) with other benefits kept for retirement.
Mercer said the value of the overall index for the Malaysian system could be increased by:
- Increase the minimum level of support for the poorest people
- Increase the level of household savings and reduce the level of household debt
- Introduce the requirement that part of the retirement benefits be taken as an income stream.
- Retirement age increases as life expectancy continues to increase
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