6th December 2023 - 3 min read
The Employees Provident Fund (EPF) has said that members’ retirement savings may potentially increase by as much as 54% with the implementation of the progressive wage policy. This comes following recent announcements that the new wage model is expected to be piloted in June 2024, with the participation of 1,000 organisations.
According to the head of the strategic management department for EPF, Balqais Yusoff, employed members with a projected annual salary increment of 3% will likely see their retirement savings grow to RM64,500 by the age of 30, and RM512,500 by the age of 55. This is equivalent to a retirement income of RM2,100 per month.
“Meanwhile, if employers use the progressive wage policy incentive of RM200 per month to increase basic wages, the member’s savings will increase to RM73,100 at the age of 30 and RM580,500 at the age of 55. This is equivalent to a retirement income of RM2,400 per month, nearly reaching the estimated minimum expenditure for an elderly person in the Klang Valley of RM2,500 per month, according to the MyBudget study by the Social Welfare Research Centre at UM,” Balqais further said, referring to the fixed monthly incentives that will be provided for employers who agree to volunteer in the pilot run of the progressive wage model next year.
In comparison, Balqais said that if an 18-year-old individual were to currently earn a minimum salary of RM1,500 per month, without any annual salary increment, he will eventually gain a savings of RM54,800 at the age of 30, and RM333,300 at the age of 55. This gives him an income of RM1,400 per month for 20 years upon retirement.
“This means that if members contribute consistently and do not leave the formal sector, then they can achieve the basic savings quantum. However, even if members have achieved the basic savings quantum, RM1,400 is (still) lower than the poverty line income,” Balqais said.
For context, the basic savings quantum (Akaun 1 only) currently set by the EPF stands at RM240,000 for those at the age of 55, which is equivalent to a monthly income of RM1,000 for 20 years. Malaysia’s poverty line income, on the other hand, is currently set at RM2,589, raised in 2022 from 2019’s rate of RM2,208.
Given the expected benefits from the implementation of the progressive wage policy, Balqais further revealed that the EPF is now considering to raise the basic savings quantum from RM240,000 to RM340,000. She explained that the basic savings goal is currently set based on the minimum pension for civil servants, which is RM1,000 per month (based on an estimated lifespan of 20 years after retirement).
“The EPF basic savings rate is reviewed every three years to ensure that the rate is in line with the economic conditions and the current cost of living. Therefore, the EPF will raise the basic savings quantum from RM240,000 to RM340,000, which will be implemented in phases. This quantum is based on the MyBudget study, taking into account 60% of the minimum expenditure for an elderly person in the Klang Valley, which is RM2,520 per month,” Balqais stated.
(Source: Malay Mail)
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