THE World Economic Forum (WEF) has recognised Malaysia’s Employees Provident Fund (EPF) as a leading example of how emerging economies can reform their retirement systems to ensure long-term financial security.
In its recent white paper, “Future-Proofing the Longevity Economy: Innovations and Key Trends,” the WEF commended EPF for its adaptive strategies that balance financial sustainability, intergenerational fairness, and inclusivity to strengthen the resilience of public retirement systems.
According to the WEF, Malaysia's EPF reforms offer valuable lessons for countries aiming to modernise their retirement systems in response to evolving demographic and economic challenges.
“Its reforms offer valuable insights for countries seeking to modernise retirement systems in response to shifting demographic and economic realities,”* the report stated.
EPF's Innovative Reforms
The EPF has introduced several key reforms aimed at providing workers with both financial flexibility and long-term retirement security.
The fund allows partial withdrawals for housing, education, and medical expenses, providing workers with access to their savings while still encouraging long-term financial planning for retirement.
During the COVID-19 pandemic, Malaysia implemented temporary withdrawal schemes to help workers cope with economic difficulties.
However, these withdrawals raised concerns about the adequacy of savings for retirement.
In response, the EPF introduced a new three-account structure in 2024, designed to offer greater security and flexibility. Under this structure, 75 per cent of savings are reserved for retirement, 15 per cent is allocated for conditional withdrawals (such as for housing or education), and the remaining 10 per cent is held in a flexible account that can be accessed at any time in case of emergencies.
Additionally, the EPF launched the i-Saraan initiative, which encourages voluntary contributions from informal sector workers through government-matching incentives.
As of 2024, the government provides a 20 per cent match, up to RM500 annually. This has led to a 53 per cent increase in participation, with the number of members rising from 380,000 in 2023 to 580,000 in 2024.
Addressing Coverage Gaps in the Workforce
The EPF is also addressing gaps in workforce coverage by exploring reforms to improve financial literacy, extend mandatory coverage to informal and migrant workers, and enhance portability for workers transitioning between formal and informal sectors.
“These efforts signal the government’s commitment to evolving the system into a more inclusive and sustainable model,” the WEF noted.
With a roadmap for legislative changes and coverage expansion in place, Malaysia aims to close the 40 per cent gap in workforce coverage for access to formal retirement schemes.
However, the coverage of the informal sector, which represents a significant portion of the workforce, remains a key challenge for the EPF.
Expanding coverage to this group is critical to ensuring that all workers are able to benefit from a secure retirement system.
Strengthening Retirement Systems Globally
The WEF report also highlights that one of the key actions for strengthening public retirement systems is the implementation of sustainable financing mechanisms.
This includes adjusting contribution rates, linking retirement ages to life expectancy, and diversifying investment strategies to maintain system solvency without burdening younger generations.
The report also suggests expanding coverage to informal and gig workers through policies such as portable retirement benefits and incentivised micro-pension schemes.
These measures would enhance financial security for those outside traditional employment structures, helping to ensure that all workers, regardless of their job type, can save adequately for retirement.
Another recommendation is the widespread implementation of auto-enrolment in retirement savings plans.
Countries that have adopted auto-enrolment systems have seen significant increases in participation rates, allowing individuals to build better retirement savings over time.
The WEF suggests that expanding auto-enrolment policies and using behavioural incentives could significantly improve long-term financial security, particularly for low- and middle-income workers.
“Expanding auto-enrolment policies and behavioural nudges can drive long-term financial security, particularly for low- and middle-income workers,” the report concluded.
By implementing such measures, Malaysia’s EPF could serve as a model for other nations in creating a more inclusive and sustainable retirement system that ensures financial security for future generations. – March 29, 2025
