THE THIRD AGE The end of the beginning | Not the beginning of the end • Employees Provident Fund • 28 June 2019 1
Agenda EPF: By the Numbers The Post-Industrial World: Changing Demographics Challenges and Opportunities A Call to Action 2
PURPOSE Provide replacement income when a person is no longer FULLY PRODUCTIVE or NOT OF EPF WORKING 3
EPF at a glance 748,687 14.2m 7.1m 507,114 SIMPANAN SHARIAH MEMBERS ACTIVE EMPLOYERS SUBSCRIBERS MEMBERS 532,360 67,073 64,631 (NEW) (NEW) (NEW) RM71.5b RM47.6b RM23.8b 68 CONTRIBUTION WITHDRAWALS (YEARLY) COLLECTIONS (YEARLY) NET BRANCHES CONTRIBUTIONS RM4.0b 52 (YEARLY) RM839.6b (MONTHLY) (WITH RAS) (TOTAL MEMBERS’ FUND) Source: EPF Statistics, 2018 4
Overview of the social protection system in Malaysia LABOUR MARKET SOCIAL ASSISTANCE SOCIAL INSURANCE INTERVENTION Cash transfer, in-kind, Old age pension Livelihood programme transfers to the elderly Employment injury insurance Skills/knowledge Health assistance development programme Employment insurance scheme Disaster relief CHALLENGES FRAGMENTED FRAMEWORK INADEQUATE PROACTIVE LACK OF COMPREHENSIVE not able to effectively address PROGRAMMES to prepare the PROGRAMME to cover adult issues faced by people workforce for the Fourth Industrial population Revolution 5
Social Protection Floors ILO Recommendation 202, 2012 “Nationally defined sets of basic social security guarantees….” Access to a set Basic of goods and INCOME SECURITY Basic services constituting Basic INCOME SECURITY for persons in ESSENTIAL INCOME SECURITY FOR for persons in ACTIVE AGE HEALTHCARE including CHILDREN unable to earn OLD AGE maternity sufficient income care All Family & Children Working age Old age National Definition of Minimum Levels Source: International Labour Organisation (ILO) 6
From womb to tomb: Social risks across lifecycle Children Youth Adults and Families Elderly Lifecycle Sickness, Survivors, Death Maternity Social Risks Employment Injury, Invalidity, Unemployment Old Age Income Shelter Healthcare Security Focus Areas Nutrition Education Mobility 7
Agenda EPF: By the Numbers The Post-Industrial World: Changing Demographics Challenges and Opportunities A Call to Action 8
Global Fertility Rates and Population Growth Global Population Growth 1955-2100 9
Malaysia is one of the fastest ageing countries in the world FROM AGEING TO AGED Young-Old, 60-69 2.8m Middle-Old, 25 70-79 MALAYSIA Old-Old, 80+ 26 2.1m CHINA 26 JAPAN 1.7m 1.5m UNITED 45 KINGDOM UNITED 69 0.9m STATES 0.8m 85 0.6m SWEDEN 0.4m 0.3m 115 FRANCE 2015 2020 2030 The interval in which the percentage of The elderly population will DOUBLE aged 65 and over doubles from 7% to 14%. within a short period of 15 years. (2015-2030) Malaysia is ageing faster than other countries. Source: Department of Statistics (2012). Population Projection 2010-2040 | National Institute of Ageing (2011). Why Population Aging Matters: A Global Perspective 10
Increasing Life Expectancy Life Expectancy 1950-2100 Malaysia 2010-2050 11
Implications 1 2 3 Growth Politics Investment 12
Agenda EPF: By the Numbers The Post-Industrial World: Changing Demographics Challenges and Opportunities A Call to Action 13
Issues and challenges 1 2 3 4 5 Ageing and Low social Low financial Burgeoning Adequacy longevity protection coverage literacy health issues amidst longevity risks 14
CHALLENGE 1 Facts on LONGEVITY 90 80 TODAY 2050 1 IN 3 1.0 134 OCTOGENARIAN will live beyond 80-89 years old YEARS OLD YEARS OLD MILLION BILLION 100 Global life Malaysia life expectancy by expectancy by 4.0 500 K CENTENARIAN 2050 2050 >100 years old YEARS OLD MILLION Source: World Economic Forum Source: World Economic Forum Source: World in 2050, PwC Source: World in 2050, PwC 90-95 2x 80 10 Y E A R S O L D YEARS MEDICAL COST YEARS OLD loss of Capacity of human body to be Malaysia life Increase at AGE 80 expectancy at HEAL TH LIFE HEALTHY compare to 60 AGE 60 EXPECTANCY Source: World Health Organisation Source: World Health Organisation Source: World Health Organisation Source: World Health Organisation 15
CHALLENGE 1 Longer Life Expectancy – the new normal Accumulation Phase Decumulation Phase FINANCING SOURCE LIFE EXPECTANCY RETIREMENT CHILD CHILD 20-40 YEARS REARING WORKING BIRTH HOUSE Individual How to finance: MARRIED LOSS OF HEALTHY LIFE Medical cost Long term care CAR EXPECTANCY Debt settlement Food and life expenses 0 AGE 20-25 EPF 75 100 55 60 SAVINGS 25-40 YEARS Parents No contributions (if not working) Risk of spending all in short timeframe CHILD AND TEENAGER Hike in medical cost 16
CHALLENGE 2 2 in 3 members age 54 have savings LOWER THAN RM50K (Account 1 + 2) ~RM833 /month 316,528 ~RM625 /month 13% Total Members at age 54 ~RM313 /month 11% 11% ~RM208 /month 65% Savings Amount > 200k 100k - 200k 50k - 100k < 50k 65% of members in risk of living below the POVERTY LINE at old age Source: EPF Statistics 17
CHALLENGE 2 Low salaries observed across all age groups 68% members do not consistently contribute to (9.9 mil) EPF Source: EPF Statistics 31% Active members achieve Basic Savings (2.3 mil) Source: EPF Statistics 50% EPF members above age 55 exhausted their EPF savings in 5 years Source: UM Survey Note: RM50k can approximately last for only 4-5 years Low Inconsistent *No minimum salary contributions wage Many members aged 31-60 and have dependents, make Low EPF savings despite high contribution rates <RM3,000 or less per month Source: EPF Statistics 7 in 10 members do not have enough savings to live above poverty line (*) Minimum wage was introduced in 2012 18
CHALLENGE 3 Large segment of Malaysian adults are either uncovered / under-covered OUTSIDE 19 % 32 % INFORMAL LABOUR 4.4 MIL SECTOR TOTAL LABOUR FORCE FORCE 7.1 MIL SELF-EMPLOYED 15.3 MIL ADDRESS ADEQUACY FORMAL HOUSEWIFE SECTOR 49 % FREELANCER 10.9 MIL EXPAND COVERAGE STUDENTS (Only 7.4 mil actively contribute to EPF) CIVIL SERVANTS DIVERSIFICATION OF NEW SKILLED CONTRIBUTIONS CELEBRITY ELDERLY ACTIVE EPF MEMBERS SEMI-SKILLED UNCOVERED UNSKILLED FISHERMAN GROUP PWD Source: Department of Statistics (2019). Employees Provident Fund (2019), CUEPACS (2015), CUEPACS (2019) 19 19
CHALLENGE 4 Malaysians have low financial literacy Malaysia ranked 66 th overall and 3 rd in South East Asia 71 71 71 68 67 66 66 63 59 57 36 32 27 Malaysia Indonesia Thailand Denmark Sweden Norway Canada Netherlands Germany Finland Singapore US UK Singapore adults Denmark, Sweden and Norway most financially literate in Asia scored at the top ranking Source: S&P Global Financial Literacy Survey 2015 20
CHALLENGE 4 Malaysians LACK THE KNOWLEDGE AND SKILLS for long-term financial planning 100,610 34% Malaysians declared of them are between 34 – 44 years old bankrupt (From 2013-2017) Source: Insolvency Department, 2017 Malaysia’s household 146% On average, for every RM1 earned, debt to household Malaysians owe RM1.46 income, higher than US levels Source: McKinsey Global Institute Report, 2015 Household savings rate 28% Total national savings rate for 1.5% Malaysia (% of disposable income) (% of GDP) 0.7% (% of GDP) Source: Data DoSM as at 2015 Malaysia has the lowest savings in the world after Japan. High income economies are at 9% of GDP 21
CHALLENGE 4 Low financial literacy leads to poor decisions and behaviour SAVINGS INSURANCE RETIREMENT 50 % 26 % 58 % 23 % 12 % 38 % Confident can Indicate their Save their money MEMBERS have no DO NOT HAVE ESTIMATED ACHIEVE AT LEAST retirement in TABUNG HAJI / other savings apart any insurance INCOME 60% INCOME income can ASN / ASB from EPF plan REPLACEMENT REPLACEMENT cover BASIC RATE should be RATE at retirement LIVING EXPENSES more than 60% ONLY Source: EPF Financial Literacy Survey 2017 22
CHALLENGE 5 BURGEONING HEALTH ISSUES due to unhealthy living Malaysians face Overweight prevalence (%) for adults of both sexes 6in10 non-communicable (BMI > 27kg/m2) diseases (NCD) 1 IN 5 have diabetes 21.0 13.3 44.2 18.4 26.5 30.2 32.2 1 IN 2 are physically inactive 1 IN 3 have hypertension 1 IN 5 are smokers MALAYSIA Indonesia Laos Myanmar Philippines Singapore Thailand BUT, IN JAPAN Japanese elderly live 8 IN 10 healthily and actively Source: WHO Non-Communicable Diseases Country Profiles, 2011 23
Opportunities 1 2 3 4 5 Gerontology Education Financial Assisted Employment and Services & Living Healthcare Advisory Malaysia needs to invest in the infrastructure for meaningful living regardless of age 24
Agenda EPF: By the Numbers The Post-Industrial World: Changing Demographics Challenges and Opportunities A Call to Action 25
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