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Retirement: An eventuality not to be ignored

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IF there is something we have learnt over the last years, it is our penchant to reinvent ourselves and weather circumstances.

IF there is something we have learnt over the last years, it is our penchant to reinvent ourselves and weather circumstances.

Within months of the COVID-19 outbreak, corporations across the world had aligned business operations to enable work from home arrangements and flexible working conditions to sustain businesses and establish some semblance of security to maintain staff morale and confidence.

In many circumstances, these manoeuvres among corporations were mere extensions of pre-existing initiatives which were in place or were in the works for the betterment of staff welfare and creating a conducive work environment.

Today, it is common to find employers attracting potential candidates with outstanding privileges and benefits. They range from flexible work hours, work from home arrangements and gyms to subsidised meals, daycare centres and even sponsored holiday trips.

It is clear to see that corporations have adopted an emphatic approach towards employees. Employers are doing more for employees with better work conditions and career development opportunities.

But there’s a leverage gaining traction among some corporations which most seem to overlook. And that lies in the evening years of an employee’s life – retirement and sustenance after that.

It is an unavoidable eventuality rarely accorded meaningful consideration.

The facts are undeniable. A study by the World Bank in 2019 indicated that 39.2% of Malaysia’s workforce were not signed up under a retirement fund, either in the private sector or government.*

Compounding this was a fall in savings last year as a share of GDP at 26.12% — the lowest since 1975.**

Not surprising, it was also reported by a renowned bank that 85% of retirees carry a sense of regret about their failure to prepare adequately for a comfortable retirement.***

It stands to reason, considering the approximate life expectancy of Malaysians as indicated by the Department of Statistics Malaysia was at 74.9, and that those currently in the 60-year age bracket are expected to live for another 18 to 21 years.****

Putting that onto the backdrop of the Malaysian retirement age of 60 would mean one would have to be prepared to sustain themselves for almost two decades without any income after retirement.

Now if an employee were to factor in inflation and a higher cost of living, the amount needed would require substantial consideration.

Reports have also revealed that the mandatory scheme is insufficient for retirement. The idea that employees are not prepared and have insufficient savings for a decent life after retirement is a concern especially after having spent between 30 to 40 years of one’s life working.

In line with this, the Private Retirement Schemes (PRS) was introduced in 2012 to encourage Malaysians to save more for retirement by complementing the mandatory scheme.

PRS, a voluntary long-term savings and investment scheme when provided as additional regular benefits and privileges in a corporation would indeed augur well for employers in enhancing the financial well-being of their employees for retirement.

PRS could be offered as an employer-sponsored programme or an employer-employee joint contribution plan that could even start with just RM100 a month.

To make it an unconscious saving habit, one of the best ways employers can help employees save more regularly for their retirement with PRS is through salary deduction.

Each employee can decide how much they wished to set aside each time they receive their salaries and then authorise a simple administrative task of debiting it into their PRS accounts.

Private Pension Administrator Malaysia (PPA) is the central administrator for the PRS Industry. It’s a one-stop-centre that advocates financial literacy on retirement planning and the PRS and oversees services related to PRS Members’ accounts on their savings provided by eight (8) PRS Providers which are all regulated by the Securities Commission of Malaysia.

There are a total of 58 funds offered by the PRS Providers for public to select and save according to their risk appetite and investment objectives for retirement.

A retirement calculator available on PPA’s website allows visitors to get a better gauge of their financial health and amount of savings needed for retirement.

All that is needed is to just input age and current salary to realise how much is to be set aside for the desired lifestyle after retirement.

One unique feature of PRS is that employees could opt for default option funds that offer an automatic glide path which switches fund priorities from a higher risk growth asset to a more conservative risk asset as age progresses to better manage risk exposure over time.

This makes it easier for employees who are new to investing as their PRS savings align to the age group along the Auto-Glide Path.

The future of work life has changed. And that comes with a whole new set of priorities which employers will have to adapt to.

The prospect of employment may soon be enveloped in a blanket of wide-angled growth like never before. It’s where employment would reach into every aspect of a worker’s lifespan in overseeing holistic development.

Employers would be looked upon to take on a pivotal role in assisting employee’s transition from work life to life after work.

In consideration of this, the benefits of offering PRS savings is a step forward to a heightened platform in human resource development.

For more information, visit www.ppa.my or call PPA’s Call Centre at 1300-131-772 .

Originally published on https://focusmalaysia.my/retirement-an-eventuality-not-to-be-ignored/
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