On average, the percentage of a retiree’s last drawn salary, known as the income replacement ratio, is only 30%.

This is far behind recommended levels to safeguard their retirement, Principal Asset Management Malaysia CEO and country head Munirah Khairuddin said.

The World Bank has recommended that the income replacement ratio should not drop below 70%.

Munirah noted that Malaysia has a good mandatory pension scheme that covers 14 million citizens.

“However, only 3% of Employees’ Provident Fund (EPF) members have enough for their retirement,” she told the media at the sidelines of the Principal Asset Management Retirement and Investment Conference 2022 today.

“EPF is a very good scheme. The employee contributes 11% of his income and his employer tops it up with another 12% to 19%, which is significantly higher than in many other countries,” she said.

Unfortunately, she said, many contributors would have used up a substantial portion of their savings by the time they retire.

“Many would have started to dip into their nest egg when they hit the age of 55, when they are allowed partial withdrawal. This could be spent on their children’s weddings, education or even that dream holiday,” she said.

Munirah also warned that state benefits such as the RM1 fee to see a doctor at a government hospital as well as cheap education would not be tenable in the future as the government would have to contend with rising inflation and a growing fiscal burden.

“Malaysia is still an ageing society so there is room to rectify the situation. However once we become an aged society, where the majority of people are over 60 years old, it would be too late,” she said.

On the whole, she added, private retirement schemes should serve as a third pillar to safeguard a person’s retirement.