PETALING JAYA: With the country heading towards an ageing society, and suffering from brain drain and experiencing lower birth rates, experts say it might be wise to raise the retirement age.
Economist and Southeast Asia Lead for the Global Labour Organisation Prof Niaz Asadullah said adopting a gradual approach would achieve the desired outcomes.
“It will minimise disruption, optimise having a longer and more productive working life for individuals and benefit the economy itself.”
The current retirement age in Malaysia is 60 years, but according to UK-based D3P, which helps governments diagnose, design and deliver better pension systems, raising the retirement age is driven by several urgent factors.
Its CEO William Price said these include Malaysia’s average life expectancy which stands at about 77 years for women and 72 years for men.
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“With the longer lifespans, it may be better to soon raise the retirement age to 65. Furthermore, this adjustment is necessary as Malaysia is projected to become an ageing society by 2043.
“By that time, about 14% of Malaysia’s population will comprise individuals aged 65 and over, due to increasing life expectancy and declining birth rates.”
Price said while the current Malaysian retirement age is among the lowest globally, they are allowed to access their Employees Provident Fund (EPF) savings at the age of 55, which is earlier than in many countries.
“The government should take a holistic approach to reviewing the retirement age. Various initiatives should be considered, such as revising EPF withdrawal policies and offering specific incentives to encourage contributions.”
Niaz said raising the retirement age would increase the workforce as more individuals would remain employed for a longer period, which can potentially alleviate some of the pressures on social security systems.
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However, he said the economic impact would depend on workforce quality, particularly on how an increased retirement age would influence labour productivity.
“While the transition to a higher retirement age needs to be managed carefully to address potential challenges related to workforce quality and productivity, the overall effect is expected to benefit economic growth.”
Niaz said from an economic growth perspective, one advantage is enhanced financial security in old age through increased retirement savings and consequently higher disposable income among seniors.
Additionally, he said this situation positively impacts growth by alleviating the fiscal burden on taxpayers, particularly in terms of financing old age pensions.
“However, there are potential drawbacks to consider. One is the risk of brain drain as Malaysian youths and recent graduates might seek employment opportunities abroad due to reduced domestic job vacancies.
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“Rising life expectancy due to the demographic shift necessitates retirement age reforms. If more jobs are not created, younger workers may experience new uncertainties in terms of higher short-term unemployment and delayed entry to the workforce.”
Socio-Economic Research Centre economist Lee Heng Guei said experienced mature employees play a stabilising role in diverse work environments, where their expertise contrasts with younger colleagues who prioritise work-life balance.
“Older workers contribute significantly through mentoring, training, and transferring essential skills and knowledge.
“Extending their tenure beyond 60 years provides substantial benefits to companies during transitional periods, ensures continuity and maximises the use of their extensive experience.”
Lee said considering whether now is the right time to raise the retirement age is not a matter of immediate timing but of overall readiness.
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“Globally, many countries have retirement ages of between 55 and 60, but it might be more practical for Malaysia to start with an increase to 62 years and then raise it over a few years to 65.
“This approach is similar to what Singapore did, where its retirement age increases were implemented gradually rather than in one step. Flexibility is key and allows for adjustments as needed.”
