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Friday, March 13, 2015

Nurul calls for pension, wage reforms

“We need to address failures in function performance and system design.”
nurul izzah, reiterementKUALA LUMPUR: There’s a case for urgent pension reform which addresses both the economic as well as social fronts. The government must reform the pension system and the salary of the workforce.
“Let not Malaysia’s ambition to become a high income nation be an excuse for an absent workable pension system and an excuse for deepening inequality,” said Lembah Pantai MP Nurul Izzah Anwar.
She was commenting on figures released by the Employees Provident Fund (EPF) which show that almost 80 per cent of workers who will turn 55 this year will not have enough savings in their Employees Provident Fund (EPF) to live above the RM830 poverty line.
“This is not surprising,” she said.
Firstly, she added, about 90 per cent of Malaysian households’ incomes come from wages and salaries, including self-employment; Secondly, for the past 15 years and even from before, the salaries of Malaysian workers have been lagging behind productivity; at roughly 45 per cent in manufacturing. “This roughly translates into the fact that our workers are underpaid by at least 45 per cent,” said Nurul; and thirdly, more than 90 per cent of the wage-earning workforce does not enjoy meaningful income levels.
She pointed out that only 11.05 per cent of government income is generated from personal income tax and only 1.7 million of the 12.4 million workforce is eligible to pay tax. “We need to have a well-designed pension system that can resolve systemic issues for adequacy and sustainability,” said Nurul “We need to address failures in function performance and system design.”
These two failures, she continued, must be addressed in pension reform.
Certainly, she conceded, there would be no one-size-fits-all solution but the lack of care that the government has placed on the future of aging Malaysians was shocking. “I have been reliably informed of internal discussions within the EPF on the issues,” she disclosed. “There must be a push for pension and salary reform.”
She notes three areas that need to be addressed:
  • First, strengthen and build institutional capacity.
  • Second, improve governance and regulation of the current pension systems. “Strong governance and regulation are essential for the operational efficiency and transparency of any pension system,” she warned.
  • A third area of reform was to expand coverage.
“Coverage in Malaysia is still far from universal and there remains substantial scope for further widening coverage,” said Nurul. “We need to make sure that our golden citizens are well cared for.”
Malaysia needs to start paying more attention to social protection, she pleaded. “This shift is required as part of a more inclusive growth strategy.”
In the light of Malaysia’s rapid population aging, she cautioned, a particularly important component of social protection would be to protect the old from not having adequate income to meet their needs. “We need an economic system which includes the poor and the marginalized.”

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