Malaysia is ageing, raise retirement age to 65 gradually, says World BankNov 24, 2020 | 🚀 Fathership
PETALING JAYA: Rapid ageing will be one of the most crucial megatrends affecting Malaysia in the coming decades, raising policy challenges in areas such as employment, income security, health care, and aged care, the World Bank has said.
In its report titled “A Silver Lining: Productive and Inclusive Ageing for Malaysia”, it said a gradual increase of the retirement age to 65 was needed as the country’s institutional framework for providing income security for older persons remained largely unchanged in spite of rapid ageing.
Malaysia now has 7% or more of its population aged 65 and above, which makes us an “ageing society” according to international convention.
“After 24 years, it will become an ‘aged society’ when this number reaches 14%. And 12 years after that, the country will become ‘super-aged’, with the share reaching 20% of the population.”
The World Bank said historically, families often financed the needs of older persons who were no longer able to work after they reach 70 years but with societal changes that are breaking this trend, these citizens were becoming increasingly vulnerable and needed urgent attention.
“With ageing, Malaysians will have to work longer. This will need to be reflected in gradual adjustments to the minimum retirement age among other policy parameters. Encouraging longer working lives will increase the financial sustainability of pension systems.
“So as a long term option, Malaysia should increase the minimum retirement age to 65 gradually, and thereafter link it to life expectancy at retirement. This will act as a strong signal to both employers and employees, thereby increasing the job rate at older ages,” it said in the report released today.
Among others, it said the objective of this was to encourage longer working lives and to increase the financial sustainability of pension systems.
The findings of the study felt that this move will help mitigate some of the impacts of ageing on growth, adding that the retirement age should not be abruptly increased.
“For instance, the transition could happen over a period of 10 years and include the provision of transparent and clear information, coupled with inclusive consultations,” it added.
The World Bank said after that, it could be linked to life expectancy, which was projected to increase further in the future.
“Linking the minimum retirement age to life expectancy will remove the need for recurring discretionary policy revisions.”
It added that the problem in Malaysia has been exacerbated by elderly couples forced to live by themselves or alone without their partners.
“Covid-19 is also a wake-up call for countries, including Malaysia, to rethink how to reform, regulate and govern aged care systems to ensure older persons live in a healthy and safe environment.”
Citing the Singapore example, the World Bank said it should emulate its Re-Employment Act which required employers to offer opportunities for those who turn 62 to continue employment in the company until 67.
“If the company is unable to provide a reemployment opportunity for the worker, it will be required to offer the worker an assistance payment of up to 3.5 months of their salary, up to a maximum of RM40,000,” it added.