Education

Malaysia's EPF: A Global Model for Sustainable Retirement Reform

William

Apr 1, 2025 — 2 min read

Malaysia’s retirement system, driven by the Employees Provident Fund (EPF), has been lauded by the World Economic Forum (WEF) as an exemplary model for sustainable retirement reform. As stated in The Edge Malaysia, the WEF commends Malaysia for its innovative approach, which adeptly balances financial sustainability, intergenerational equity, and inclusivity.

An Adaptive Strategy

The EPF has introduced a series of adaptive strategies that provide financial flexibility while safeguarding long-term savings for retirement. This includes allowing partial withdrawals for essential needs such as housing, education, and medical expenses. During the Covid-19 pandemic, temporary withdrawal schemes were introduced to assist workers, though concerns about retirement adequacy persist.

In 2024, the EPF unveiled a three-account structure to further empower workers. This structure allocates 75% of savings for retirement, 15% for conditional withdrawals, and 10% for emergencies—a testament to their responsive policy-making.

Initiatives for Inclusivity

EPF’s outreach extends beyond standard workers, with the i-Saraan initiative encouraging voluntary contributions from informal workers through government-matching incentives. The initiative successfully led to a significant increase in participation by offering a 20% matching contribution from the government.

Meanwhile, Malaysia is actively exploring reforms to bring informal and migrant workers under its mandatory coverage ambit. By improving financial literacy and enhancing system portability, the government is spearheading efforts to create a more inclusive retirement ecosystem.

Strategies for Global Adaptation

To strengthen retirement systems globally, the WEF highlights sustainable financing mechanisms as a critical action. By adjusting contribution rates and adopting diversified investment strategies, systems can remain solvent without placing undue burdens on future generations.

Internationally, expanded coverage of informal and gig workers through portable benefits and incentivized micro-pension schemes could notably enhance financial security for those outside traditional employment models. One proposed method is encouraging automatic enrolment in retirement savings plans, enhancing participation rates and savings accumulation.

A Vision for the Future

By embracing a holistic approach, the EPF is not just enhancing individual financial security but also crafting a blueprint for global retirement reform. As more countries face the challenges posed by aging populations and economic shifts, Malaysia’s model proves to be a valuable resource for nations seeking sustainable solutions to retirement challenges.

Read also: EPF declares dividend rates of 6.3% for both conventional, shariah savings for 2024 — highest since 2017.

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