COMMENT | Why 65 is the 'new 60' for retirement

COMMENT | Minister in the Prime Minister’s Department (Law and Institutional Reform) Azalina Othman Said's recent proposal to raise Malaysia's retirement age to 65 is not merely a recommendation.

It is a vital and timely call to action that the National Union of Bank Employees (Nube) wholeheartedly supports.

Azalina’s suggestion aligns perfectly with Nube's advocacy in our yet-to-be-negotiated 20th Collective Agreement, and we are ready to assist the minister in realising this crucial initiative.

Consider the global landscape. Countries like Canada and the US already have 65 as the retirement age while Australia has already boosted this to 67, with some nations in the EU signalling they might follow, in response to demographic shifts and increased life expectancies. Why not Malaysia?

Multitudes pushed to retirement

In the private sector, general estimates suggest that about 200,000 workers retire every year. This is a broad estimate and not specifically tied to the exact age of 60, as the private sector can have variations in retirement clauses and some may retire earlier or later.

In the civil sector, some 1,804 civil servants under 60 opted for early retirement in the first nine months of 2024, according to the latest publicly available data from the Prime Minister's Department.

Like in the private sector, it is important to note that these represent early departures of public servants under the age of 60, not those leaving after reaching the mandatory retirement age.

In the banking sector, particularly, Nube has seen its membership significantly decline over the past 25 years, more than halving from an estimated 30,000 three decades ago to about 15,000 members currently.

As older workers retire and technology advances, many traditional clerical and routine banking positions have been abolished or are increasingly handled by automation and artificial intelligence.

Senior workforce a boon

A more senior workforce can be highly beneficial for the banking industry as senior employees often possess decades of accumulated experience and invaluable tacit knowledge.

They would have navigated various economic cycles, regulatory changes, and customer behaviours, providing a depth of understanding that younger, less experienced employees may lack.

This experience is crucial for complex problem-solving, risk management, and strategic decision-making.

Senior bankers can serve as excellent mentors for their younger colleagues. They have also established long-standing relationships with clients, built on trust and a deep understanding of financial needs.

These relationships are invaluable for customer retention and business growth at a bank. Older customers, in particular, may feel more comfortable interacting with bankers of a similar age.

Senior workers typically exhibit higher job satisfaction and lower turnover rates compared to their younger counterparts. This stability can reduce recruitment and training costs for banks and contribute to a more consistent and reliable workforce.

Banks can invest in upskilling and reskilling programmes for older employees and create an age-inclusive workplace culture that values experience alongside technological prowess.

Be flexible

However, in raising the maximum permissible working age to 65, workers must still be allowed the option of leaving at 60 if that’s their desire.

This flexibility will fulfil individual circumstances, health considerations, and personal financial readiness.

One significant benefit of extending the retirement age is the reduced likelihood of seniors becoming a financial burden on their children.

By remaining in the workforce longer, individuals can continue to contribute to their own upkeep, healthcare, and leisure activities, thereby alleviating potential financial strain on the younger generation. This extended period of self-sufficiency can significantly improve the quality of life for retirees and foster greater intergenerational financial independence.

Furthermore, empirical evidence from Malaysia's previous increase of the retirement age in 2012 suggests that allowing senior workers to remain employed for an additional five years has not demonstrably hindered the opportunities or earnings of the younger generation.

Over a decade has passed since this adjustment, and there is no widespread indication that it has created a bottleneck in career progression or suppressed wages for new entrants into the workforce.

Finally, the evolving preferences of the younger generation themselves also contribute to the logic of raising the retirement age.

A growing segment of younger workers in Malaysia is increasingly drawn to the flexibility and autonomy of the gig economy, entrepreneurial ventures, and commission-based, on-field jobs.

This contrasts sharply with the traditional desk-bound positions often held by senior workers, suggesting a natural diversification of the labour market.

As younger generations gravitate towards these alternative employment models, the presence of older workers in more conventional roles is less likely to directly compete with or displace them, thereby mitigating potential concerns about job scarcity for new graduates and early-career professionals.

Ageing population

There are more merits than demerits in raising the retirement age by another five years in both the private and civil sectors.

The crux of the matter is that Malaysia's ageing population means citizens are living longer, healthier lives. Yet our current 60-year retirement age might be putting productive individuals out to pasture too early, squandering valuable human capital.

Some may argue about the lack of concern for work-life balance. In this context, we must reframe our understanding that a longer working life doesn't equate to more strenuous work.

It can entail greater flexibility, phased retirement, and leveraging experience. The focus should be on the quality of the working life, not duration.

A longer working life addresses critical financial security. With rising living costs and alarmingly low Employees Provident Fund balances for many, extending the working age to 65 provides a crucial window to build more robust retirement savings, ensuring a more dignified future and greater pension fund sustainability.

The time to act is now.

J SOLOMON is the general secretary of the National Union of Bank Employees.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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