Insurance companies not in private pension plan

Malaysia Government has proposed a new private pension plan to be implemented by mid 2010 and insurance companies are apparently not in the picture.

The new pension scheme targets the self-employed (approximately 2 million) and those who are outside EPF and government's own pension scheme. EPF members who want to contribute more than the EPF's statutory requirements can also participate. The new pension funds are to be operated by fund management firms to be licensed by the Securities Commission.

In overseas, private pension plans are usually operated by insurance companies as insurance companies have expertise in managing long-term investment and more importantly in insuring longevity. Pension plans without protecting longevity risk at best should only be called retirement plans.

In recent years, insurance companies have also come up with GMxB type of plans (e.g. GMAB, GMWB, GMDB, GMIB) that provide various levels of guarantee on investment returns. All these seem to position them well to be the front runner for managing pension plans.

References: The Star 1, 2 & 3, Business Times 1 & 2