BUDGET 2019 | The government should seek ways to reform the current pension scheme in anticipation of the country’s ageing population and to mitigate its impact on economic growth.

According to the Economic Outlook 2019 report released by the Finance Ministry today, the current pension scheme may not be sustainable in the long run as it will pose a larger financial burden to the government’s fiscal position.

“Currently, the civil service pension scheme is adopting the unfunded arrangement (pay as you go) where it is disbursed directly from the federal government budget.

“Therefore, to ensure a sustainable fiscal position in the long run, the civil service pension scheme could be improved and modernised by introducing the defined contribution scheme for new recruitments in the civil services,” it said.

As of 2017, the number of people aged 65 and above in Malaysia is approximately two million or 6.3 per cent of the total population. By 2020, the number is projected to increase to 2.4 million, constituting about seven percent of the population, hence becoming an ageing nation.

Outlining several measures to mitigate the negative impact of population ageing on the economic growth, the report suggested that increasing female labour force participation rate would partially reduce the downward pressure on labour following population ageing.

In 2017, the female and male labour force participation rates stood at 54.5 per cent and 80.1 percent, respectively.

“Therefore, intensifying the implementation of various policies ranging from flexible working arrangements, provision of quality childcare facilities, skills training and entrepreneurship programmes for women will accelerate women’s participation in the labour force,” said the report.

It also suggested that gradual retirement and re-employment opportunities for post-retirement-aged workers as some possible options.

“The gradual retirement and re-employment opportunities will be beneficial to workers, employers and the nation through continuous Employees Provident Fund (EPF) contribution and tax revenue collection,” it said.

As productivity is a game changer for economic growth, the report said efforts to improve productivity should be further strengthened by technological innovation and increasing adoption of robotics.

Other ways forward suggested are creating a conducive environment for the elderly and encourage lifelong learning including skills upgrading across every life cycle to keep people productive.

- Bernama