While the ongoing COVID-19 crisis has had immediate tangible effects to the economy, it has also brought to the fore several key issues:
- That majority of individuals do not have sufficient savings to tide themselves over in an emergency or in the face of unexpected income loss.
- For many people, their mandated retirement savings might be their only form of savings. This could be seen from the government’s announcement to allow RM500 per month to be withdrawn from individual’s Employees’ Provident Fund (EPF) accounts under the i-Lestari scheme.
- When retirement funds are used as a proxy for emergency savings, it leads to people having to decide between meeting present demands or saving for their future needs. A lack of basic financial knowledge, or lack of longer-term financial planning, could lead to uninformed decision making regarding this trade-off.
- This also highlights the challenge for policymakers, as short-term relief comes at the expense of longer-term trade-offs. Further, policymakers will have to consider any potential impact from a macro perspective, including the impact that pension funds have on capital markets and economic growth.
- Most recently, there has also been an acknowledgement from the government on the lack of retirement coverage for workers in the gig economy, with the announcement under the Penjana Economic Recovery Plan of a RM50 million matching grant for gig platforms who help workers contribute into EPF’s i-Saraan scheme or Socso’s employment injury scheme. While the take-up rate and long-term effectiveness of this scheme is yet to be seen, there is still a need to address issues of coverage from a long-term structural perspective.
- This report provides an overview on how the evolving nature of work may exacerbate the current challenges for long-term and retirement savings in Malaysia and further examines possible solutions which can provide more equitable access to the capital market for greater financial inclusion.
For the full report, please click here.