Published October 22, 2008

Retirees fear savings may run out

Survey shows 4 out of 5 nearing retirement put blame rising inflation

By PAULINE NG
IN KUALA LUMPUR

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IT'S hardly a surprise, but an increasing number of Malaysians consider their retirement savings insufficient. An independent survey has found that more than a third of people approaching retirement are less confident now than they were a year ago.

Worrying: Although Malaysians have a high propensity to save, their current savings behaviour shows a lack of proper planning

Four out of five pointed to rising inflation as the main culprit, saying it has seriously affected their lifestyle.

A significant 48 per cent - or almost half of the 1,024 participants in the survey, commissioned by insurance company Prudential Assurance Malaysia (PAM) - are fearful they will not have enough money to retire.

Worryingly, four out of 10 see themselves working beyond the mandatory retirement age, more than a third because they see a need to boost their income.

Because the survey was conducted in August - before the main damage from the global financial crisis was felt - it is possible the findings could have been even more negative.

The survey comes on the heels of inflation running up to a 27-year high of 8.5 per cent in August after massive fuel, food and transport price increases, and gives an insight into how pessimistic most Malaysians are about their savings.

Their pessimism is not without justification. Although Malaysians - like all Asians - have a high propensity to save - 72 per cent claim they do save for retirement - their current savings behaviour shows a lack of proper planning, according to PAM chief executive Bill Lisle.

Among those who save, 77 per cent invest in traditional but low-yielding vehicles such as bank fixed deposits and savings accounts, the Prudential Retire-Meter 2008 findings revealed.

'This is not going to give them the yield they need when they retire at 55,' Mr Lisle said at a briefing yesterday. He said investment-linked products tended to offer better returns over the longer term, but conceded the disastrous implosion of the US sub-prime and investment instruments packaged with it had eroded investor confidence. 'I think this will make people more hesitant and stop them making plans.'

Few Malaysians are focused on saving for retirement. Forty-one per cent put aside as much as they can, hoping it will suffice - but nine out of 10 would dip into retirement savings if they had to.

This undisciplined approach is compounded by a lack of retirement products, Mr Lisle said, adding that the government ought to provide more tax incentives so people are prepared to take responsibility for their retirement needs. 'We should aim to enjoy, rather than endure, retirement,' he said. But he acknowledged that few Malaysians want to worry themselves about it now.

The lack of retirement reserves is a national concern as wages are not in keeping with inflation. Many professions, for example, still offer the same salary scale as two decades ago.

Only a fifth of those surveyed think the Employees Provident Fund - the biggest state-sanctioned pension fund - will meet their retirement needs. EPF's own previous survey found that its members' retirement funds last an average of three years.

Given longer mortality rates and rising living costs, the problem is obviously challenging. Those interviewed had a monthly income of RM3,000 (S$1,259) and above.