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About Minimum Retirement Age

Why Enact the Minimum Retirement Age?

With Malaysians living longer, the onset of an ageing population by 2030 and a projected shortage of Employees Provident Fund (EPF) savings, the Minimum Retirement Age Act 2012 (the Act) was enforced on 1 July, 2013 to set the retirement age for private sector employees at 60 years. The Minimum Retirement Age is applicable to all categories of employees, except for those specified in Section 2 of the Act. For more information on who is exempted from the Act, follow this link. Prior to the enforcement of the Act, there were no laws governing the retirement age of private sector employees. In practice, however, employers had set the retirement age at 55 years. This was based on the age required for withdrawing savings from the EPF. Furthermore, studies showed that 86% of EPF contributors did not have sufficient savings to last them through retirement1. These studies, which in 2003 surveyed 2,427 former EPF contributors, found that 14% of the retirees exhausted their savings in three years, half of them ran out of savings in five years and 70% used up their savings in 10 years. EPF data in 2010 also showed that 73% of contributors had saved less than RM50,000 by the time they reached 54 years of age. This shortage of savings is compounded by the longer average lifespan of Malaysians, which has risen to 75 years. In fact, by 2030, Malaysia is projected to become an aged nation, where 15% of the population will be aged 60 years and above. This is compared to just 7.8% of the population aged 60 and over in 2010. In view of these statistics, the Malaysian Government in March 2011 decided to conduct a feasibility study on establishing a minimum retirement age for private sector employees through enacting of the relevant laws. The Ministry of Human Resources (MoHR) then collected input and feedback from stakeholders on the minimum retirement age. The Ministry’s efforts in implementing the minimum retirement age falls under the Human Capital Development Strategic Reform Initiative of Malaysia’s Economic Transformation Programme (ETP). In line with the ETP’s goal of transforming Malaysian into a high-income nation by 2020, the higher retirement age enacted through Minimum Retirement Age Act 2012 is expected to contribute towards the supply of human capital in the country, while avoiding the loss of income for employees beyond 55 years.
1Based on expenditure of RM720 per month for a period of 20 years.

Minister’s Message

In Malaysia’s effort to become a high-income nation by 2020, the country’s human capital development represents an integral part of its transformation. An educated and skilled workforce forms the backbone of a developed economy, providing better employment opportunities and contributing towards increasing Malaysia’s global competitiveness. This global competitiveness is a core objective of the country’s Economic Transformation Programme (ETP). Towards this end, the Ministry of Human Resources has implemented initiatives which align our labour policies and laws with that of more developed economies. Central to these initiatives was the formulation of the Minimum Retirement Age Act 2012 (the Act), which came into force on 1 July 2013. The new law, which fixed the minimum retirement age for private sector employees at 60 years, marked an important milestone in Malaysia, furthering our transformation into a high-income nation. Prior to the enforcement of the Act, there were no laws governing the retirement age of private sector employees in Malaysia, although in practice companies had fixed 55 years as the retirement age for employees. This is lower than the retirement age in most of our neighbours, as well as in other Asian countries – by contrast, the retirement age in most ASEAN countries2, as well as leading Asian economies such as China, India, Japan and South Korea is 60 years. In Singapore, another ASEAN country and one of Malaysia’s closest neighbours, the retirement age is within the 61-64 years age bracket. The retirement age in developed countries such as Australia, Canada and Germany, meanwhile, is 65 years or above. The need to mandate a higher retirement age than 55 years was also driven by the longer average lifespan of Malaysians, which in turn will lead the country towards having an ageing population by 2030. Additionally, projections show that most Malaysians will see their Employees Provident Fund (EPF) savings run out during retirement. The Minimum Retirement Age Act 2012, therefore, is expected to address these matters by allowing employees to work for longer and strengthen their savings before retirement. It will also help to enhance the nation’s productivity, contributing a vital element to our high-income aspirations. I am encouraged by the progress of the Act’s enforcement thus far. I would also like to take this opportunity to record my appreciation to the Act’s stakeholders, namely the participants of the tripartite consultations that were held in formulating the Act. These parties comprised employer, employee and Government representatives, whose cooperation were central to this Act coming to fruition. I am confident the new law will play its role in bringing Malaysia towards high-income status and look forward witnessing the creation of a more productive and financially secure workforce. Dato’ Sri Richard Riot Anak Jaem Minister of Human Resources
2Brunei, Cambodia, Indonesia, Laos, the Philippines, Thailand, Vietnam and Myanmar.

Secretary-General’s Message

The Minimum Retirement Age Act 2012 was implemented as part of the Government’s efforts to raise Malaysia’s competitiveness on the global stage. This focus on competitiveness is among the two engines driving Malaysia’s Economic Transformation Programme (ETP) and will be achieved through the programme’s six Strategic Reform Initiatives (SRI). The ETP’s other engine comprises the 12 National Key Economic Areas (NKEAs) in which economic growth will be focused on. Among the SRIs is the Human Capital Development (HCD), which aims to strengthen and address the human capital capabilities and needs of the NKEAs, while enhancing the skills of Malaysian employees. This will be achieved through the implementation of workplace and workforce transformation, where the former puts in place the components for an efficient workplace and the latter focuses on unlocking the women talent, enhancing labour market data and up skilling and upgrading the labour force. The implementation of the Minimum Retirement Age Act 2012 captivated under the HCD SRI’s efforts to effect workplace transformation through policy measures. Apart from addressing the higher average age of Malaysians, the onset of an ageing population and insufficient savings through retirement, the minimum retirement age of 60 years provided for under the Act is also an important contributor to raise the nation’s productivity level. This is as the higher retirement age, compared to the 55 years which employees have hitherto adhered to, will help the Malaysian economy retain the skilled human capital required for its transformation into a high-income nation. The episode of formulation of the Minimum Retirement Age Act 2012 has been dilatory and challenging. Nevertheless, the Ministry of Human Resources’ efforts to formulate this act have been fulfilling. We received valuable cooperation and feedbacks from our tripartite partners representing employees and employers, and I look forward to continue our camaraderie and consummate our journey towards achieving a high-income nation by 2020. Datuk Seri Hj. Saripuddin bin Hj. Kasim Secretary General, Ministry of Human Resources
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