MORE Malaysian working adults (MWA) have debts that will likely last well into their retirement, as they struggle with rising financial hardships, according to the Credit Counselling and Debt Management Agency’s (AKPK) inaugural nationwide financial behaviour survey.
The report warned that a notable number of MWA’s are unable to make ends meet, are uncomfortable with their current financial situation and lack financial resilience.
A total of three out of 10 working adults have had to borrow money to buy essential goods in the past six months, while one out of five working adults did not manage to save money in the last six months.
The majority of those in these categories earned less than RM2,000 or were self-employed, the survey found.
“Many do not have money for emergency needs, medical expenses, and cannot cover three months’ expenses if retrenched,” the report said.
AKPK’s definition of a person able to make ends meet was when he or she is in a financial position to cover daily expenses, afford to buy the items he or she wants, and does not resort to borrowing to buy basic needs.
A comfortable financial position is described in the study as having enough money to cover basic needs and also some extra money at the end of the month, having confidence to achieve short-term and long-term financial goals and the confidence to retire comfortably.
The survey, which was carried out nationwide from January to July this year, involved more than 3,500 Malaysian working adults. AKPK is a unit under Bank Negara Malaysia.
The agency said it was concerned with the current level of indebtedness, which has risen in tandem with living costs.
“It is noted that in the last few years, getting a housing loan is becoming more difficult in Malaysia as property prices have gone up in a much greater proportion than salary increase.
“This probably explains why the percentage of (working adults) having a housing loan is lower compared to those having a car loan, as it (car loan) is easier to apply,” the report said.
For those in the 40-49 age group, housing loans topped the list of the largest debt. At this age, most working adults were found to be still servicing their housing loans as well as car loans.
Personal loans were less for this age group, but credit card loans showed a surge compared to the younger age groups, where almost half of those polled within this age group had credit card loans.
AKPK said almost two out of 10 working adults need to borrow money to buy essential goods, which revealed a lack of good financial behaviour and knowledge.
“This problem needs to be nipped in the bud. Intervention by the government and the private sector is needed, such as providing financial knowledge for working adults.”
No easy retirement
The survey also found that more than half of those about to retire are still servicing housing and car loans, while at least half of those in the 50-59 age group recorded high debt.
As many as 40% were found to be still servicing personal and credit card loans and more than one in 10 were servicing non-bank loans.
Global professional services firm Mercer, in its recently launched annual Melbourne Mercer Global Pension Index (MMGPI), said the survey showed that Malaysians may need more than the Employees Provident Fund (EPF) to retire comfortably.
Mercer Malaysia CEO Hash Piperdy also said action needed to be taken to address the ageing population, with over five million Malaysians expected to be over 60 years old by 2030, and nearly 10 million will be over 60 by 2050.
Mercer suggested that the minimum amount of savings EPF members should have at age 55 is RM228,000, which equates a monthly withdrawal of RM950 to cover basic needs for 20 years.
However, EPF recently reported that only 18% of members have the minimum savings target of RM228,000 in their account by 55.
Mercer suggested that the overall index value for the Malaysian system can be increased by raising the minimum level of support for the poorest aged individuals; raising the level of household saving and lowering the level of household debt; introducing a requirement that part of the retirement benefit must be taken as an income stream; and increasing the pension age as life expectancy continues to increase.
“It is high time for industry and community groups to look into Private Retirement Schemes and other ways to boost long-term savings,” Piperdy said.
THE MALAYSIAN INSIGHT
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