As Malaysia’s ageing population grows and retirement savings fall short, the Sandwich Generation faces mounting financial pressure – raising urgent questions about Employees’ Provident Fund (EPF) adequacy and the retirement age.
Malaysia’s Ageing Population: The Trend Towards Longer Lives
Malaysia’s retirement savings gap is becoming harder to ignore as it becomes an ageing population with rising life expectancy.
Globally, Hong Kong, Japan, South Korea, Singapore and Australia already rank globally in the top ten for life expectancy, driven by advances in nutrition, improved healthcare, and progress in rural health outcomes.
Although Malaysia currently ranks 73rd globally with an average life expectancy of 75.3 years, similar factors are driving our ageing population.
Additionally, the Khazanah Research Institute has also identified the reduction in maternal deaths as an additional driver specific to Malaysia.
The impact of an ageing population, however, must be considered alongside a nation’s Total Fertility Rate (TFR).
The Director-General of the National Population and Family Development Board recently announced that Malaysia’s TFR has declined steadily over the past few decades.
It now stands at 1.7 children per female. This is well below the 2.1 replacement level needed for a stable population.
As a result, the Department of Statistics of Malaysia attributes this to rising costs of living, delayed marriages, and a preference for smaller families.
Retirement Savings and the Sandwich Generation
According to EPF, retirees need a minimum of RM390,000 to retire. That is enough to survive but not necessarily enough to thrive. Concerningly, only 36% of EPF account holders are on track to meet this amount.
COVID-19-era EPF withdrawals have made this worse. Many workers saw their retirement balances reduced. This happened even as the withdrawals provided much-needed financial relief between 2020 and 2022.
Women are disproportionately affected. In particular, women’s retirement savings are often significantly lower than men’s, reflecting time away from the workforce to raise children.
Who is the Sandwich Generation?
Like many peer countries, Malaysia faces a shrinking workforce, strained public finances, and a heavy burden on the so-called Sandwich Generation – those aged between 35 and 50.
Sandwiched between caring for elderly parents who are living longer and raising children of their own, this group faces pressure from both directions.
Consequently, the Social Wellbeing Research Centre reports that this dynamic exposes significant shortcomings in the nation’s retirement system.
According to seamedia.my, about 55% of older Malaysians rely on financial support from their adult children, with the Sandwich Generation providing, on average, RM500 per month to their ageing parents.
Meanwhile, property prices are outpacing salary increments, trapping this generation between competing financial obligations with little room to build their own wealth.
Should Malaysia Increase the Retirement Age?
In 2023, two million people took to the streets in France – protesting, striking, and in some cases turning to violence – when the government proposed raising the retirement age from 62 to 64.
President Emmanuel Macron called the reforms “just and responsible”. However, workers in their late 50s felt particularly aggrieved, having counted on accessing their full retirement benefits at 62.
Despite fierce protests, the controversial reform was signed into law. As the French Government argued, the ratio between workers and retirees was diminishing rapidly.
France is not alone.
In fact, over 30 countries worldwide, including the United States, the United Kingdom and Denmark, have raised their minimum retirement age to address low TFR and ageing populations.
In Malaysia, Prime Minister Datuk Seri Anwar Ibrahim recently announced that the retirement age policy is under review as part of the 13th Malaysia Plan (13MP).
Currently, under the Minimum Retirement Age Act 2012, the minimum retirement age for private-sector workers is 60. This matches the mandatory age for civil servants.
The proposal now under consideration would raise both limits to 65.
Malaysia’s Human Resources Minister, Steven Sim Chee Keong, confirmed that a Special Committee led by the Ministry’s Deputy Secretary-General (Policy and International), Mohd Shaharin Umar, is examining the matter.
The Pros and Cons of Raising the Retirement Age on Retirement Savings
The Case For
The most direct argument in favour is economic.
An additional five years of mandatory EPF contributions would build greater retirement equity for workers. In doing so, it reduces the financial burden on the Sandwich Generation, who currently subsidise ageing parents unable to fund their own retirement.
Furthermore, given continued improvements in health outcomes, a longer working life may also be more feasible than it once was.
The Case Against
The strongest counterargument is simple arithmetic.
With a minimum retirement age of 65 and an average life expectancy of 75 years, the average Malaysian worker would enjoy just ten years of retirement.
That is a narrow window in which to take those overseas holidays, pursue leisure activities, and spend time with grandchildren.
For many, this makes it a poor trade-off for decades of contribution.
Moreover, for many Malaysian workers, retirement represents a well-deserved reward after 30 to 40 years of building the nation.
Raising the threshold changes the terms of an implicit agreement that has shaped how entire generations have planned their lives.
Final Thoughts on Malaysia’s Ageing Population and Retirement Savings
Whether the retirement age should remain at 60 or rise to 65 is one of the more consequential policy questions Malaysia currently faces.
As an ageing nation with a widening retirement savings gap, policymakers must balance economic realities against the right of every worker to a secure and dignified retirement.
It must be done without, however, sacrificing the Sandwich Generation’s ability to build their own financial future in the process.
Ultimately, the true measure of a retirement system is not how long people remain in employment, but whether they can retire with dignity when their working lives are done.
Donna Barclay is a lecturer in the Faculty of Business, Design and Arts at Swinburne University of Technology Sarawak Campus. With a passion for the law of tort, she teaches a variety of law subjects with a focus on finance law, and employment law. Donna is contactable at [email protected]