Don’t incentivise early retirement for workers, says ILO official

 

ILO economist Simon Brimblecombe said employers would benefit from having an older and more experienced workforce. (File pic)

KUALA LUMPUR: An economist with the International Labour Organization (ILO) has warned against incentivising early retirement for workers, particularly with Malaysia having an ageing population.

Simon Brimblecombe, chief technical adviser and head of regional actuarial services at the ILO, called for more post-retirement employment opportunities, even on a part-time basis.

He advocated for flexible retirement schemes that give retirees employment options and don’t penalise those who retire later.

Some retirement schemes would penalise members for retiring later than a certain age or for returning to the workforce, by reducing or recalculating their benefits, among other things.

The ILO official cited partial retirement schemes in Finland and Switzerland as examples to emulate. These allow gainfully employed individuals to reduce their working hours and withdraw retirement assets concurrently.

“We need to sell the notion that it’s not about having to work longer or having a higher retirement age, but about providing support in tune to your needs if you need to retire for health reasons,” he said during a panel session at EPF’s International Social Wellbeing Conference.

With Malaysia’s population ageing “relatively rapidly”, Brimblecombe said employers would benefit from having an older and more experienced workforce.

“There are people aged 55 and above with experience that employers actually need. Employers, worker representatives, and governments recognise the advantages of having elderly people in the workforce.”

However, he said legislation was needed to ensure social protection so that employers were not forced to keep employees in the workforce until they were 70.

Yesterday, Prime Minister Anwar Ibrahim said the old-age dependency ratio in Malaysia was projected to decrease from 10 adults for every elderly person in 2020 to three adults for every elderly person in 2060.

This means that elderly folk will have fewer adult family members to depend on once they are old, leaving them susceptible to poverty.

Voluntary schemes don’t work

Meanwhile, Brimblecombe said voluntary contribution schemes simply did not work compared with mandatory pension coverage, adding that this was the case globally.

“Those who actually have the money don’t think it’s a priority … And those who have a lower income don’t have the money to do it either. So we need to move to mandatory coverage.”

He pointed out that EPF and the Social Security Organisation (Socso) were better risk managers than most individuals, and said this was an important message to convey to Malaysians.

He also expressed concern about the low coverage of retirement schemes in the region, estimating that about 33% to 45% of people were not covered due to self-employment and informal sector work.

“I think it’s because many still see this as a cost rather than an investment.”

EPF had introduced the i-Saraan programme for gig workers and the self-employed to contribute voluntarily. Putrajaya had given matching incentives to encourage these individuals to contribute to the scheme. - FMT