Is our retirement safe?

Whenever government entities like the 1MDB get called into question, we tend to look take a harder look at our finances.  The Edge has called into question how Malaysia will pay its ballooning pension liabilities.

The Edge weekly in its latest edition said that tighter finances meant that pension reforms were inevitable and that such reforms were happening around the globe because a significant jump in the cost of caring for people in their old age — be it to put in place infrastructure that is more friendly to the aged or more expensive healthcare requirements.

The Edge’s Cindy Yeap, Kamarul Azhar and Kathy Fong wrote that while Malaysia’s population was still much younger compared with that of the developed countries where these pension reforms have taken place, one in 10 Malaysians will be aged 65 and above by 2035, according to projections by Malaysia’s Department of Statistics.

“That means 3.89 million people aged 65 and above — more than double the 1.43 million in 2010 — and this is projected to rise to 4.41 million, or 11.4% of Malaysia’s population, by 2040,” they wrote.

The Edge said that in fact, official projections show Malaysia would reach the 7% threshold The World Bankdefines as an ageing society in just six years, in 2021.

The question comes in if the pensions look suspect, so might our retirement savings.  It's possible.  The truth is the EPF seems like a black box.  It pays out dividends every year to all the account holders, but we never know what the net asset value of the fund is.   For all we know it could be a ponzi scheme.

Will we ever know?  probably not.  But if you ever thought the EPF is a bit shady when it comes to investment funds, moving the money to a genuine investment fund which holds stocks with net asset values and distributions will likely be the best bet.  Maybe you won't get the stable holdings like a normal bank account with interest, but at least you will have some idea what you are really holding.

I know some companies are already moving the EPF contributions to a private scheme.  See if the company you are working for offers this option.