KUALA LUMPUR: Malaysia's pension system is ranked 12th in Asia and 61st globally, with a lot of room for improvement, according to German insurance giant Allianz's first edition of its Global Pension Report.
Allianz said when it comes to sustainability, Malaysia was still lagging.
This is mainly due to the fact that the country has yet to introduce any measures that link the retirement age or the benefit ratio to the increasing life expectancy of its population.
"This might be owed to the circumstance that Malaysia, with its young society, is still very well positioned in terms of financial leeway and demographic change – actually ranking fifth in this Allianz Pension Indicator (API) - exempting it from any immediate reform pressure.
"With respect to adequacy, Malaysia's ranking also only in the lower third," it said in a statement today.
Besides that, Allianz said despite the existence of a compulsory capital-funded saving scheme for individuals employed in the private sector, the Employee Provident Fund, pension coverage is still comparatively low.
Furthermore, it said, there is still room for improvement with respect to financial accessibility and financial literacy.
Meanwhile, Malaysia's ranking is only at mid-field with respect to the level of private household's net financial assets compared to gross domestic product (GDP).
Allianz said this was despite the government's efforts to increase the awareness of the need for private old-age provision in recent years.
"Against the background that other countries in the region like Indonesia with similar favourable demographic and financial conditions have already stepped up their reform efforts, Malaysia should reconsider its reform approach as long as there is still room to manoeuvre," it added.