Malaysia’s shift towards an ageing population is revealing weaknesses in how households build long-term financial security, according to a report by the PNB Research Institute (PNBRI). The findings suggest that working longer does not always lead to enough savings or assets to support retirement.

As the population ages, the report notes that policies focused mainly on poverty relief and subsidies may not be enough to address longer-term financial risks faced by working-age Malaysians.

Malaysia Is Ageing Before Becoming A High-Income Economy

The report highlights that Malaysia is ageing before reaching high-income status. This combination places added pressure on household finances. Compared with economies such as Japan, South Korea, and Singapore, Malaysian households generally have slower income growth, lower savings, higher debt exposure, and smaller financial buffers.

Malaysia crossed the “ageing society” threshold in 2022, when people aged 65 and above made up more than 7% of the population. This share rose to 7.7% by 2024 and is projected to reach about 14% by 2040, marking the country’s transition into an “aged nation” within just over two decades.

By 2040, one in seven Malaysians is expected to be aged 65 or older, even as many younger and middle-aged workers continue to struggle to build long-term financial stability.

Wage And Savings Trends Limit Asset Growth

PNBRI points to slow wage growth and income inequality as key barriers to wealth building. Real wages for young graduates have barely increased over the past 20 years, while wealth remains heavily concentrated, with the richest 10% controlling close to 60% of total wealth.

About half of Employees Provident Fund contributors have savings below RM10,000, an amount that would support only a short period of retirement. Nearly 60% of workers earn less than RM4,000 a month. Income remains unevenly distributed, with the bottom 20% of households holding less than 6% of national income, compared with about 41% held by the top 20%.

These trends make it harder for households to build savings and financial buffers over time.

Policy Focus Shifts Towards Economic Security

The report calls for a shift in policy focus from reducing poverty to strengthening economic security. Instead of relying mainly on income transfers or subsidies, PNBRI outlines a framework built around three pillars: capability, ownership, and resilience.

Together, these pillars focus on helping individuals earn more over time, build assets, and protect those assets against shocks.

Capability Gaps Weaken Income Growth

The first pillar, capability, focuses on skills, financial literacy, and access to better-paying opportunities.

PNBRI notes that higher education levels have not led to stronger wage growth or better mobility for many Malaysians. Median monthly pay for young graduates remains between RM2,500 and RM3,000, while entry-level homes in major cities are priced at around six to seven times annual median income.

The report also highlights a growing gap between productivity and wages. While productivity has increased since the early 2000s, wage growth has lagged behind. Fragmented training systems and limited access to retirement savings and insurance for gig, informal, and contract workers further weaken long-term financial outcomes.

Ownership Policies Aim To Broaden Asset Access

The second pillar, ownership, focuses on expanding access to assets such as savings schemes, housing, and employee ownership.

PNBRI cites examples from countries like Singapore, the United States, the United Kingdom, and Australia. These include matched savings schemes, co-investment housing models, and employee ownership programmes, which have helped households build assets while managing risk.

The report also highlights incentives that encourage long-term saving, such as tax-advantaged retirement accounts and time-locked savings schemes, as tools that support steady asset accumulation.

Resilience Focuses On Protecting Households From Shocks

The third pillar, resilience, looks at how households can be better protected from financial shocks across different life stages and types of work.

PNBRI highlights the need for broader and more portable social protection, especially for gig and informal workers. Other areas include emergency savings schemes, better coordination across savings and insurance systems, climate-related risk-sharing, and strong public services such as healthcare, education, childcare, and transport to help reduce household costs.

What The Findings Indicate For Long-Term Financial Stability

Taken together, the findings suggest that Malaysia’s ageing population could worsen existing gaps in household financial preparedness. As more Malaysians grow older, a larger share may enter later life with limited savings, fewer assets, and greater exposure to income shocks, especially if current income and savings trends continue.

The report also notes that these pressures affect more than just older Malaysians. Younger and middle-aged workers facing slow wage growth, rising living costs, and uneven access to social protection may struggle to build financial buffers early in life. Over time, this could increase reliance on public support systems and place added strain on government resources.

PNBRI emphasised that its framework is meant to guide thinking rather than prescribe a fixed policy model. The ideas discussed require further research, testing, and public discussion. By focusing on how income, assets, and protection build over a lifetime, the report shifts attention from short-term support towards longer-term financial security.

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