Four out of five Malaysian workers who will turn 55 this year will not have enough savings in their Employees Provident Fund (EPF) accounts to get them out of poverty, said the EPF’s chief operating officer today.
CEO Shahril Ridza Ridzuan said for the next 20 years, 80% of workers will not have enough saved up to be able to live on RM800 a month, which is slightly less than the national average poverty line income of RM830.
Shahril said this was due to the fact that most Malaysian employees had low-paying jobs when they first started contributing to the fund, and continued to receive relatively low wages until the age of 55.
According to the EPF’s figures, more than 75% of the fund’s 14 million contributors earn less than RM2,000 a month. Another 15% of employees in the country make between RM2,000 and RM5,000 a month, while the remaining 10% makes more than RM5,000 a month.
The EPF has set a total personal savings of RM196,800 as the threshold that would allow a contributor to spend at least RM800 a month for the next 20 years after their 55th birthday.
Shahril said that only 20% of workers would achieve savings of RM196,800 in time for the retirement age – and that percentage will likely stay the same for the foreseeable future.
“Historically, we have a low wage environment, so that percentage has inched up only a little.
“This is why we tell contributors not to take out their savings till they are 60, when they really retire.
“That extra five years can earn them an extra 40% through compound interest,” he told The Malaysian Insider‘s Sheridan Mahavera.
He added that the new reality of working life in Malaysia will drive more locals to work beyond the age of 55 in order to save up enough to live out the rest of ther lives.
“This is the trend in developed countries and we are getting there. The reality is that you cannot retire and enjoy yourself at 55 any longer.”
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