KUCHING: Malaysia’s Employees Provident Fund (EPF) savings gap could strain public finances as more workers enter old age underprepared.
Universiti Malaysia Sarawak (UNIMAS) senior lecturer Dr Dzul Hadzwan Husaini said inadequate retirement savings should not be treated as an individual problem alone, as the wider cost could eventually fall on the government, families and future taxpayers.
He said that the implications would extend far beyond individual retirees, as more Malaysians entering retirement without sufficient financial resources would increase pressure on public spending.
“Expenditure on healthcare, social assistance and elderly welfare will inevitably rise as Malaysia moves rapidly towards an ageing society, where a growing share of the population would no longer be economically active.
“This is particularly important as Malaysia moves rapidly towards an ageing society, where a growing share of the population would no longer be economically active.
“And this should be viewed as a long-term fiscal challenge rather than simply an EPF issue,” he told Sarawak Tribune.
He said this when he was commenting on the latest figure showing that only 3.04 million, or 38.3 per cent, of 7.94 million active EPF members aged 18 to 60 had achieved the basic savings level as at end-May 2026.
He said when individuals were unable to finance their own retirement, the government would inevitably become the provider of last resort.
“This would mean higher expenditure on healthcare subsidies, income assistance, housing support and long-term elderly care,” he said.
At the same time, he added that the government would have fewer working-age taxpayers supporting a growing number of retirees.
He said the challenge would become even more significant as Malaysia’s fertility rate declined while life expectancy continued to increase.
“In other words, fewer workers will be supporting more elderly citizens.
“Without adequate retirement savings today, the fiscal burden on future governments could become substantially larger,” he said.
Dzul said retirement insecurity would also affect the economy through lower household consumption, higher old-age poverty and weaker financial resilience across generations.
“Retirees with limited savings would naturally reduce their spending and focus only on basic necessities.
“Lower household consumption would weaken domestic demand, one of the key drivers of Malaysia’s economic growth.”
He said many retirees would also depend financially on their children or relatives.
“This means working adults would have to divert part of their income to support elderly family members instead of spending, investing or purchasing homes.
“The result is weaker consumption across multiple generations,” he said.
He said inadequate retirement income would increase the risk of old-age poverty.
“As more elderly Malaysians struggled financially, inequality and social vulnerability would become more pronounced, creating additional long-term economic and social challenges.”
He said there was also an important social dimension, as families may increasingly need to financially support elderly parents.
“This would transfer the burden to the younger working generation and reduce their own ability to save, invest or raise children.
“This could create a cycle where financial insecurity was passed from one generation to the next.”
He said Malaysia could also face wider inequality if only certain groups were able to build enough retirement savings.
“Retirement security increasingly reflects inequality accumulated throughout a person’s working life.
“Those with stable formal employment, higher wages and continuous EPF contributions are more likely to retire comfortably.
“In contrast, workers in informal employment, the gig economy, self-employment or low-income occupations often contributed less or contributed irregularly, leaving them financially vulnerable in old age.”
As Malaysia became an ageing nation, Dzul said this difference could create a two-tier retirement system.
“One group would enjoy financial independence, while another would depend heavily on family support or government assistance.
“Such disparities would widen wealth inequality and reduce social mobility across generations.”
On policy responses, he said addressing retirement adequacy required more than simply increasing EPF contributions.
“The root issue is that many Malaysians simply do not earn enough to save enough,” he said.
He said Malaysia should place greater emphasis on growing Gross National Income (GNI), not merely Gross Domestic Product (GDP).
“GDP measured the value of economic activity taking place within the country, while GNI reflected the income actually earned by Malaysians, whether domestically or abroad.”
Raising national income, he said, would ultimately strengthen households’ ability to save for retirement.
“This required structural reforms that created more high-value jobs, improved labour productivity and developed talent capable of competing in regional and global markets.”
He said Malaysians should be equipped with skills that allowed them to generate higher incomes, including through international professional services, digital industries and knowledge-based sectors.
“At the same time, retirement policies should continue to encourage voluntary savings, strengthen financial literacy and expand retirement protection for informal and gig workers.
“A sustainable retirement system cannot rely solely on EPF reforms.
It must begin with an economy that enables people to earn enough during their working years to retire with dignity,” he said.
