March
13
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EPF says 80% of workers have savings below poverty line as they turn 55
Nearly 80% of workers who will turn 55 this year will not have enough savings in their Employees Provident Fund (EPF) to live above the poverty line, according to figures released by the fund’s chief executive officer. The Malaysian Insider reports:
Datuk Shahril Ridza Ridzuan said for the next 20 years, the workers would not have enough in total EPF savings to enable them to live on RM800 a month, which is close to Malaysia’s average poverty line income of RM830.
This is because most of them had low wages when they started contributing to the fund in 1980s, and continued earning relatively low salaries till they turned 55, said Shahril, who did not provide a number for this batch of retirees.
The revelation shines the spotlight on the problem of low incomes among a majority of Malaysian workers, even as Putrajaya said it aims to make Malaysia a high income nation in five years’ time.
According to Shahril, more than 75% of its 14 million EPF contributors earn less than RM2,000 a month. About 15% earn between RM2,000 and RM5,000 a month, while those earning more than RM5,000 are in the top 10%.
The EPF has set RM196,800 as a savings threshold that would allow a contributor to spend at least RM800 a month for the next 20 years.
The threshold is revised every three years to take into account inflation.
Only about 20% of its contributors who turn 55 this year are expected to have RM196,800 in total savings. That percentage is likely to stay about the same in the coming years, said Shahril.
“Historically, we have a low wage environment, so that percentage has inched up only a little.
“This is why we tell contributors not to take out their savings till they are 60, when they really retire.
“That extra five years can earn them an extra 40% through compound interest,” Shahril (pic, right) said when met after a talk organised by the Chevening Alumni Association in Kuala Lumpur last night.
These figures, he said, reflect the new reality of working life in Malaysia, as people will have to work beyond 55 in order to save enough to live out the rest of their lives.
“This is the trend in developed countries and we are getting there. The reality is that you cannot retire and enjoy yourself at 55 any longer.”
That age was set in the 1950s and has not been changed to take into account longer life expectancies, he said, adding that these days, people expect to live through their 70s.
This trend is compounded by the fact that Malaysia is a rapidly ageing nation. In 2030, 17% of the population will be aged above 65, he said. In 2040, people aged 65 will outnumber younger individuals.
“So we need policies to deal with this, such as financial literacy training so that young people are aware of the need to save for retirement and how to integrate old workers into the market.
“These are issues that advanced economies have to deal with and we are getting there,” said Shahril. – March 13, 2015.
Reason too much leakages ie withdrawal for education, housing, The original design for the EPF back in the 1950s was income in retirement. Psssss Australia is about to fall into the same pit ie proposal to allow their eqv of EPF for use to purchase first home. The current Aussie Liberal government is right wing like the current Malaysian BN government right wing ie privatisation, free enterprise etc.
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Urgh, Malaysia is becoming a developed country. SO liek a devloped country we have to raise retirement age like in the US, UK and Australia. 65 is the norm, now these countries are making their people work way past 65 to 67. Ops different mindset, those in Australia, UK don;t want to work past 65, government forcing them, in Malaysia eople want to work past 57, 60. BN government should allow them and WIN VOTES by announcing open ended retirement age at GE14.
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