Let's Talk about Ageing, Part 2: Social security, costs and risks of societal ageing
Possibly the most pressing concerns about retirement are the financial implications – on the part of the elderly and their families and the government. This challenge exists in many countries, where there is a need to provide adequate and sustainable pension and social security while ensuring sufficient coverage to its beneficiaries.
Generally, the minimum retirement age used to be 55 years old, but in July 2013, the Malaysian government imposed a minimum retirement age of 60 for the first time on private-sector employees. This change was made mainly because, in 2003, the Ministry of Human Resources reported that as high as 86% of the Employee Provident Fund (EPF) contributors did not have sufficient savings to last them through retirement (based on the expenditure of RM720 per month for 20 years) [1].
Even more disconcerting is that 70% of the surveyed EPF contributors in the report had exhausted their savings within 10 years. In 2010, EPF data found that as many as 73% of contributors had saved less than RM50,000 when they reached 54 years of age. Should a retiree live up to the ripe old age of 80 (an additional 26 years), this would provide an average of RM1,923 per year to survive on – which translates to RM160 a month. Given this situation, the majority of elderly in Malaysia would not be able to afford paying for retirement homes or nursing homes by themselves as the minimum payment is approximately RM800 each month.
However, the problem of insufficient savings for retirement is averted for government civil servants where pensioners are given 50% of their last drawn salary for life, and a spouse will continue receiving the fund in the event of the pensioner's death. Nevertheless, this only passes on the fiscal stress from the pensioner to the government's coffer. The Retirement Fund Inc (KWAP) CEO, Wan Kamaruzaman Wan Ahmad, stated that ever-growing pension liabilities placed on the government amounts to some RM300 billion with the impending pay-out for the current civil servant size of 1.6 million people. A strong political will is needed to drive towards an alternative scheme that will be more sustainable in the long term [2].
Based on a study by Asia Pacific Risk Center on the proportion of elderly against Gross Domestic Product per Capita (GDP) in Asia Pacific countries [3], Malaysia is categorised under Group 3 (together with Vietnam, India, Indonesia and Philippines). These countries are where its population is defined as young and need to grow rich before old. Countries that fall in Group 3 have the youngest demographic profiles thriving in developing economies with relatively low GDP per capita. This translates to a small portion of expenditure on elderly healthcare compared to more developed and aged nations. Group 1 countries face the most significant challenge from ageing but they benefit from high GDP per capita (i.e. Japan, Hong Kong, Australia, New Zealand and Singapore).
Meanwhile, Group 2 countries are currently experiencing diverse markets but shall see a rise of aged and developing nations by 2030 with strong GDP growth (i.e. China, Taiwan, South Korea and Thailand). A study by University of Hong Kong and the Senior Citizen Home Safety Association found that working-age workers would have to care for 3.1 million children and the elderly in 2034. About 2 decades from now, there will be two working adults for every person over 64 [4].
With the ever-growing population of elderly people, the demand for nursing or daycare homes is also increasing. "There is a demand, and we are admitting more and more residents than before. I don't think that children these days have the time to take care of their ageing parents," Pam Chow, the manager at Glory Days Nursing Home, commented. "Most of them who send their elderly parents to me was guilt-stricken for not being able to take care of their parents themselves. When they do come back for a visit at the nursing home, they will shower them with love and affection – more so than they would have done at home if they were staying together. This is because the stress and fatigue from caring for the elderly by themselves are eliminated, and hence it becomes easier to be more loving towards their parents. I think we are all facing such problems in society today."
** This is part of the series on “Let’s Talk About Ageing” from my research that was published in this article. This series feature portions of my writing which was unpublished. Kindly note that the information and statistics featured in these write-ups were updated only until 2016, as the article was published in April 2017.
Part 1: Health and Wellbeing as Wealth
References:
[1] Ministry of Human Resource. About Minimum Retirement Age: Why Enact the Minimum Retirement Age? http://minretirementage.mohr.gov.my/general/about-minimum-retirement-age/
[2] Free Malaysia Today. 2016. “Civil servants may pay for own retirement fund”. Published on July 25, 2016. Accessed on 7 March 2017. <http://www.freemalaysiatoday.com/category/nation/2016/07/25/civil-servants-may-pay-for-own-retirement-fund/>
[3] Asia Pacific Risk Center. 2016. Advancing into the Golden Years: Cost of Healthcare for Asia Pacific’s Elderly (Full Report). Marsh & McLennan Companies. 68pp.
[4] South China Morning Post. 2017. Pressure on for Hong Kong ‘sandwich generation’ as number of dependants rises. Published on March 6, 2017. Accessed on March 8, 2017. <http://www.scmp.com/news/hong-kong/education-community/article/2076212/pressure-hong-kong-sandwich-generation-number>