Malaysia’s first private retirement scheme (PRS), which is made available from September, is expected to mark a significant milestone for the private retirement industry in Malaysia.
In the initial stage, eight PRS provid- ers with 24 funds have been approved by the Securities Commission Malaysia (SC) along with the estab- lishment of the Private Pension Administrator (PPA) as the sole regulator of the industry.
In an interview with Money Compass, the Federation of Investment Manag- ers Malaysia (FIMM) Chief Executive Officer Ahmad Zakie Ahmad Shariff said the fundamental basis of the PRS is to ensure financial security for Malaysians.
“On the average, a Malaysian’s contribution to the Employees’ Provident Fund is about RM140,000 by the age of 54. Assum- ing that with all the progress made in our medical and lifestyle, we bring forward another 20 years after retiring, the retirement income will be about RM500 to RM600 per month. This is
well below the poverty line of RM700 and we must seriously do something about this.
“About 8% of our population is above 60 year-old when compared to Singapore where 15% of its population is above 60 years old that could lead to a so called ‘silver hair tsunami’. It is estimated that Malaysia will reach this stage by 2020 with 12% to 15% of our population above 60 years old.”
Ahmad Zakie said it would be fine if these senior citizens could sustain themselves; otherwise, they have to fall back on their children. The problem is that the children tend to get married at a later age these days. By the time the parents need to depend on their children, the children have almost reached their retirement age and have their own families to look after.
This would become a social problem if no action is taken to address it properly. The government realised the situation and has introduced PRS as one of the instruments to overcome the retirement issue.