KUALA LUMPUR: An economist is proposing for the government to reform the nation's retirement plan into a non-contributory Universal Basic Pension (UBP) scheme, which is available to everyone.
Professor Geoffrey Williams said retirement funds should be made available from a 'Malaysian SuperFund' ring-fenced for pensions.
UBP is a social welfare programme that provides a guaranteed minimum income to all eligible individuals upon reaching retirement age, regardless of their employment history, income or other factors.
This concept is implemented in several countries.
He also said that monthly payout of Employees Provident Fund (EPF) savings were better than withdrawing a lump sum upon retirement.
He said there was no non-contributory component unless the individual falls under the welfare category in the Senior Citizen Assistance scheme, which provides RM500 per month to anyone above 60 without income and family support.
Based on EPF data, the average savings for a contributor in the Bottom 40 (B40) group was only RM1,713, and half of them had less than RM1,063 in their EPF accounts, which would not even last a month.
For those in the Middle 40 (M40) group, the average savings was RM28,032, and half of them had less than RM20,660, which could last only less than a year.
"Only one in three active EPF members aged 18 to 55 will save enough for a minimum pension, and only one in five will have enough for a decent lifestyle, because many are inactive contributors, so they cannot save much due to factors such as unemployment."
He said EPF members' savings mostly come from their wages and employers' contribution, besides voluntary top-ups.
"Around 80 per cent of EPF members are at risk of running out of savings quickly, and they have no other formal pension scheme," he said.
Bank Islam Malaysia chief economist Dr Mohd Afzanizam Abdul Rashid said retirement savings depends on the individual's awareness about financial management.
"People should remain steadfast and disciplined in their spending habits. This is based on the level of salary which requires multiple policies that include education, capacity-building and industrial policies," he said.
He highlighted the menace of financial scams that could potentially wipe out the entire savings of an individual, irrespective whether they are retired or still young.
"Financial scams can create a sudden loss in savings and it can happen to any of us, even to the financially literate individual," he said.
Earlier, Prime Minister Datuk Seri Anwar Ibrahim said EPF data showed that one in four members had exhausted their savings within five years after reaching withdrawal age.