QUESTION 1

Malaysian is ageing, and the population over 65 should come to 15% of the population by 2035. In Malaysia Employee benefit schemes called Employees Provident Fund (EPF). Current Employees Provident Fund (EPF) savings for most Malaysians are barely enough for a decent life after retirement.

Meanwhile, Malaysian life expectancy has been rising. Life expectancy at birth in 2015 was 72.5 years for males and 77.4 years for females. Assuming someone lives until 75, with no major medical expenses and outstanding debt, average savings of MYR194,000.00 would bring MYR25.00 per day, or only MYR810.00 monthly. Of course, this crude analysis does not consider many factors, but the picture is clearly dire.

In 2017, EPF raised the minimum savings target by age 55 from MYR197,000 to MYR228,000.00. But only 18% of members have this much, far short of its target of getting at least half its members to meet the minimum level by 2021. Low investment returns and withdrawals permitted for housing, health and education imply even less for retirement.

More than two-thirds (68%) of EPF members aged 54 had less than MYR50,000.00 in EPF savings! With the household poverty line income at MYR930.00 monthly, MYR50,000.00 in savings will only last 4 years. The bottom fifth of EPF members have average savings of only MYR6,909.00.

According to EPF, 70% of members who withdraw their funds at age 55 use up their savings less than a decade after retiring. Most EPF savings are therefore not enough to stay out of poverty after retirement. There are 32 million people in Malaysia, with 69% of the population of working age between 15 and 65. Only 48% of the labour force of 14.5 million have active EPF accounts.

REQUIRED

Even if one plans well his retirement planning, yet he or she might face challenges in keeping the plan on track. Discuss any five (5) common issues.