When retirement dreams seem elusive

A LUXURY cruise holiday to the Caribbean. Catching the spring season cherry blossoms in Japan, perhaps.

Malaysians have dreamt of the life they want after retiring from the workforce, according to a recent survey, and one in every two respondents list travelling as one thing they aspire to do most post-retirement.

Others say they hope to spend more time with their friends and family once they retire.

However, are Malaysians saving enough, or rather, planning sufficiently to allow them the comfort of doing what they want to do after retirement? Tan Kar Hor, the chief executive officer of Prudential Assurance Malaysia Bhd, thinks not.

“A big majority of Malaysians, that is, more than 60 per cent, are not working towards achieving those retirement dreams,” Tan remarked.

“Most have taken the ‘I couldn’t be bothered’ attitude. They are not worried if they have enough money to last them to the final days, post retirement,” he said.

Tan said a survey commissioned by Prudential and conducted in April this year by Synovate Malaysia, a market research firm, suggests a worrying trend: Malaysians generally show a lack of interest or concern of their retirement.

Of the 1,038 respondents, only retirement and an alarming one in six do not know exactly how much they need for their sunset years.

Almost half of the respondents have not thought of how much they need to retire comfortably. Close to 60 per cent say they just save as much as they can now and hope that they would have enough to cover their retirement needs.

“Only 35 per cent are confident that the EPF (Employees Provident Fund) and personal savings are sufficient to support their life when they retire. Yet, only 17 per cent are worried,” Tan noted.

The survey covered key urban centres including the Klang Valley, Penang, Ipoh, Johor Baru, Kuching and Kota Kinabalu. The respondents were Malaysians aged 28 and above with monthly household income of RM3,000 and higher.

“There is a strong dependence on bank savings or fixed deposit (FD) accounts. But FD is not enough to provide for retirement,” he added.

The survey also asked 169 current retirees for their experience.

Due to the financial constraints, over a quarter of this group are unable to do the things they would like to do, which is most likely to be travelling.

Only about 42 per cent of retirees are confident that they have enough to cover their retirement needs.

Sadly, Tan said, among those who are not confident of having enough to last their retirement years, 37 per cent plan to rejoin the workforce.

“Unfortunately, Malaysians are not helping themselves by keeping the financial experts at bay when it comes to discussing their savings or retirement plans,” said Tan.

The Prudential survey indicates that only 11 per cent are comfortable speaking to a personal financial planner about their retirement needs, while 18 per cent has no problem discussing with an insurance agent. A fifth of the respondents would rather seek help from a bank representative.

“Malaysians need professionals to help them. The situation is akin to people who are depressed or emotionally unstable and need to see a psychologist early, although this is not quite a norm in Asia,” said Tan.

However, he noted that retirement has been one hot topic among Malaysians in the past 18 months or so, perhaps since the EPF revealed a startling report two years ago.

He said according to the state pension fund’s estimates, most retirees took out all their EPF savings within three years.

“This is extremely alarming,” Tan said. “Even though subsequent reports from the EPF put the number at 10 years, it is still alarming.” Compounding this fear is the longer life expectancy of Malaysians.

Based on the Health Ministry’s statistics, Malaysian men are expected to live 72 years these days, substantially longer compared with the 64 years expected back in the 1980s.

Malaysian women are expected to live even longer at 76 years now, up from 67 years over two decades ago.

“EPF is the main retirement fund for Malaysia. Now, combine this with the expected lifespan of the people? The scenario becomes extremely alarming,” Tan said.

“Imagine the group between ages 30 and 40 today is retiring only 15-20 years from now, by when the expected lifespan may hit 80 years. If they exhaust the EPF savings within 10 years, then the final 15 years of their lives, what are they going to do?” he asked.

The insurance company was quick to smell the opportunity and the Prudential survey just confirmed those worries and the urgent need for alternatives.

“Malaysians need a proper retirement product to help address this issue, but the industry is still in the exploration stage,” he said, adding that players in the industry cannot start such products in Malaysia due to many constraints and restrictions on the regulation part.

Firstly, the regulator here does not allow the set-up of a private pension fund, which exists in other advanced countries where the citizens are more sophisticated in terms of investment. Secondly, the current tax structure is making annuity product — which pays regular income to a retiree from a lump sum investment — less attractive in Malaysia.

The industry is constantly in dialogue with regulators to resolve these issues, Tan said.

In the meantime, Prudential plans to launch a hybrid product that will combine three insurance classes — investment-linked, universal life and annuity policies to meet Malaysians’ urgent need for a retirement scheme while addressing the regulation issues.

“The product structure will focus more on investment-linked and universal life policies. Annuity plans are not that attractive as there are tax restrictions whereby annual income earned after retirement is subject to tax,” said Tan.

He expects to roll out this product in the current quarter, subject to Bank Negara Malaysia’s approval.
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