EPF: M'sia needs new 'social contract' on financial security
The Covid-19 pandemic has highlighted the need for greater protections for vulnerable Malaysians, with the World Bank mooting the introduction of a state-funded social pension that would improve assistance to the elderly.
Commenting on this during an online World Bank forum, Employees Provident Fund (EPF) chief strategy officer Nurhisham Hussein said there was a need for Malaysians to explore a new social contract on how they would like to protect themselves financially in the future.
The Covid-19 pandemic has highlighted the need for greater protections for vulnerable Malaysians, with the World Bank mooting the introduction of a state-funded social pension that would improve assistance to the elderly.
Commenting on this during an online World Bank forum, Employees Provident Fund (EPF) chief strategy officer Nurhisham Hussein said there was a need for Malaysians to explore a new social contract on how they would like to protect themselves financially in the future.
"We need a new social contract, people need to agree if these are the kind of benefits that they want, they have to agree that this is how we need to finance it.
"We can't willy nilly impose it from the top. This requires consultation and agreement from the people, and it does require much stronger governance," he said today.
The World Bank, in its Malaysian Economic Monitor report published today, noted that at the age of 54, more than half of workers have EPF balances under RM150,000, while almost three quarters have balances under RM250,000.
It said this was inadequate to support life after retirement while existing government assistance such as Bantuan Orang Tua (BOT) has insufficient reach, helping only 26.4 percent of older persons in the bottom 20 percent.
Hence, it said a non-contributory social pension is vital to assist the vulnerable and poor elderly people.
In the short and medium terms, the World Bank suggested a modest social pension with the same benefit level as BOT (RM350 cash aid per month) but expanded to those aged 65 and above in the B40 group using the existing Cost of Living Aid (BSH) system.
Introducing this would cost only 1.6 percent of the projected fiscal revenue for 2020, and the programme could be further expanded in the future.
According to Nurhisham, one of the issues with the current system for social protection is that it is employment-based, meaning a significant part of the population is left out - such as housewives or those who don't have fixed employment for example.
The government has allowed those working in the gig economy to make voluntary contributions, even introducing a RM50 million matching grant to encourage contributions.
However, the reception among gig workers has been mixed, with some saying they don't have the funds to make voluntary contributions.
Think-tank The Centre CEO Idlan Zakaria said some may also not be motivated to make voluntary contributions.
As such, she proposed that there should be a pilot programme where the platforms used by gig-workers auto-enrol them for EPF contributions, with an option for them to opt-out.
Chiming in, Nurhisham said this is something the EPF has been proposing for a while.
"Our personal vision is you should get an EPF number when you're born," he added, saying this should also be extended to having a tax number and Social Security Organisation (Socso) number at birth.
This, he said, would ensure the delivery of government services reaches all citizens regardless of circumstance.
Meanwhile, Institute Of Strategic and International Studies (Isis) economic analyst Calvin Cheng said social protections are not sustainable in the current situation as Malaysia has a shrinking prime-age working population and a growing number of pensioners.
He said a potential solution would have to encompass several aspects, namely higher pension contribution rates, greater employment especially among women and also working options for the elderly, and financing pension accounts using government revenue.
Idlan said a social pension would have had to be a project that everyone commits to regardless of political changes and can be funded using progressive taxes - with the consultation and agreement of the people.
"The workers of today are the pensioners of tomorrow," she said.
Commenting further on progressive taxes, Idlan cited examples such as depoliticised goods and services tax, inheritance tax, and capital gains tax.
"We're not proposing to do them today, but we should be exploring how this would look like in the nature of the economic market that Malaysia is in," she said.
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