The 13th annual Mercer CFA Institute Global Pension Index (MCGPI) revealed that Malaysia’s retirement income system ranked third in Asia and 23^rd globally. 

Malaysia managed to remain at a top position in the region despite a slight decrease in the country’s overall index value from 60.1 in 2020 to 59.6 in 2021. 

Malaysia’s retirement income system 2021

The Global Pension Index measures each retirement system through three weighted sub-indices – adequacy, sustainability and integrity.

Malaysia’s system rankings

Among the three sub-indices measured, Malaysia saw an improvement in its adequacy score to 50.6 this year. 

The country scored highest for integrity (76.8), followed by sustainability (57.5) and adequacy. 

According to the study, Malaysia is at the 34th place for adequacy. The adequacy sub-index considers how the country’s system is designed to provide adequate retirement benefits. 

As for integrity, Malaysia sits at 20^th, where factors that affect the citizens’ confidence in the retirement system are considered.

Meanwhile, the county is 15^th for the sustainability sub-index. This measures the likelihood of the system’s ability to provide benefits in the future.

Improvements for the future

Janet Li, Mercer’s Wealth Business Leader for Asia said that the government can look at ways to increase the minimum level of support for the poorest retirees as well as the labour force participation rate, especially at older ages.

If Malaysia can also raise the level of household savings and lower the level of household debt, it will help boost both the adequacy and sustainability scores, and eventually the overall index value for its retirement system.

– said, Janet.

On the other hand, the president of CFA Society Malaysia, Justin Ong said the ongoing Covid-19 pandemic has made it even harder for Malaysians to retire peacefully. 

He added that low-interest rates and an increasing life expectancy have put unprecedented pressure on both public and private pension systems around the world.

In Malaysia, the issue is further exacerbated by inadequate financial literacy among Malaysians.

– said, Justin.

Meanwhile, Malaysia went from a C+ rating to a C grade this year. This implies a pension system that has some good features but also major risks or shortcomings that should be addressed. 

The global study of the retirement income system

The Global Pension Index is a collaborative research project by CFA Institute in collaboration with the Monash Centre for Financial Studies and Mercer. 

This year, the Global Pension Index in Malaysia involves 43 systems around the world. It includes four new systems from Iceland, Taiwan, United Arab Emirates and Uruguay.

The Malaysian system achieved the same grade as several other Asian economies like China, Indonesia and Taiwan this year.

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(Source:  Malay Mail)