The retirement time bomb ticks on

Not many Malaysians can say for sure that they have enough in the nest egg to not have to worry about money when they call it a day at the office.

As of December last year, 6.7 million of the 14 million contributors to the Employees Provident Fund (EPF) do not even have RM10,000 in their savings. This was up from 4.7 million in 2021.

Even if the family scrimps on every expense, RM10,000 will last barely three months, if they are lucky.

Many had depleted their savings through withdrawals under the i-Sinar scheme, launched in 2020 to help those who had lost jobs during the Covid-19 pandemic to survive.

As a result, many now have almost nothing in their EPF accounts.

But that’s not the worst of it. In April this year, Prime Minister Anwar Ibrahim warned that 81% of EPF contributors will have so little in their retirement funds that they will live out their life in poverty.

Bank Negara Malaysia has estimated that the average Malaysian will still have 19 more years to live by the time he runs out of his savings. That means almost two decades with nothing to live on.

How did we get it all so wrong?

Many would cite the massive withdrawals from the EPF during the Covid-19 years for the depletion in savings of the average Malaysian worker.

However, that is just the symptom of a problem that has manifested from yet another shortcoming: inadequate compensation.

Salaries in Malaysia are still so low that few have enough money left at the end of the month for savings. If not for the mandatory contribution to the EPF, they would have no reserves at all.

A 2022 survey by financial services website RinggitPlus showed that 21% of Malaysian employees do not put aside anything … not even for the rainy day.

Half of the survey respondents put aside less than RM500 a month.

A retirement fund will come only this far to see a retiree through his golden years. Personal savings are a necessary supplement.

But to give workers the option to save more money, salaries have to be raised.

However, businesses are not sharing more of their profits with their workers.

According to data from the Department of Statistics Malaysia, the total compensation to employees accounted for 37.2% of company profits in 2020.

In countries such as Singapore, Australia and the US, the ratio ranged from 42.7% to 55%.

Prime Minister Anwar Ibrahim announced in August that efforts would be made by Putrajaya to raise the ratio to 45%. That would be a start.

In the interim, many more Malaysians, not just those in the B40 (the poorest 40% of the population) but even some from the M40 group, will continue to count on handouts to put food on the table. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.