News Digest 20100309-20100320

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Findings from Retire-Meter

Findings from Prudential Retire-Meter:

• 9% respondents have clear idea how much is needed for their retirement
• 65% expressed concern of not having enough money to live through retirement
• >50% would retire as soon as reaching financial independence
• 75% would start savings for retirement now if knowing the amount required for retirement

Source: Business Times

News Digest 20091105-20091116

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INGeasi for Retirement

Features of INGeasi for Retirement:

• 3 packages:
• Life as Usual
• No Worries
• Unleash
• Guaranteed yearly income (in multiples of RM120) from age 55 to 85
• Annual non-guaranteed cash dividends
• Non-guaranteed terminal dividend
• Death and TPD coverage
• Sum insured = 20 x annual retirement income
• Waiver of premium on critical illness
• Family income until age 65 (subject to maximum 20 years) if death/TPD before age 65
• Premium payment term: lower of 20 years or reaching age 60
• Cash-out option

Source: The Edge, ING

Budget 2010: Responses

LIAM:

• Micro insurance: insurance not only for high-income earners; will work with authorities to launch the scheme
• RM1,000 tax relief on annuity: by 2020, 10% of population age >60 years; investment income earned in annuity fund should be tax free.
• Insurance penetration rate will improve, currently 41%

Source: LIAM

PIAM:

• Restructuring of motor insurance cover for 3rd party liabilities is necessary
• Lead to ultimate deregulation and liberalisation of motor and fire tariff

Source: Business Times

EPF:

• 1Malaysia Retirement Scheme will benefit 2 mil self-employed and non-wage earners
• Only 18% of 5.72 mil active members have enough savings to finance their retirements
• 40% of active members chose to contribute at 8% instead of 11%

Source: Bernama

Retirement statistics

Some retirement statistics that are relevant in preparation for private pension in Malaysia:

• 12 mil labour force
• 35-40% not covered by retirement schemes
• 2 mil self-employed
• 12 mil EPF members, 5.7 mil active
• 90% of EPF contributors have less than RM100,000 in their accounts
• 70% of EPF members exhausted their EPF savings within 3 years
• Potentially RM60 bil can be channeled into private pension fund

Interestingly, some statistics from Australia for comparisons:

• The average superannuation account balance at retirement:
• Women: A$73,000
• Men: A$155,000

Source: The Edge Weekly (7/9/2009), The West Australian (7/9/2009), both not available online

Articles on insurance/takaful over the weekend

Some of the articles appearing in StarBizWeek Special on 8 August that may be worth reading:

Keeping abreast with changes: Various insurance chieftains touch on issues like financial planning, bancassurance, professionalism, sustainability of business and future challenges and growth drivers.

Innovation key to growth for takaful: Leaders of takaful industry talk on sustainability of takaful industry, liberalisation, bancatakaful, human capital and retakaful.

Linking markets with Islamic finance: Towards the end of the article, BNM governor mentions that the insurance industry has a long way to go and develop products for retirement, pension schemes, annuities and medical coverage. Professionalism and capitalisation need to be increased. There should be more mergers in the domestic sector and the need for setting up enabling infrastructure.

Source: The Star

More news articles on private pension

CIMB Group CEO Nazir opines that private pension scheme should be designed to cater for the low-income earners rather than the rich.

Source: Business Times

SC is seeking the best model for private pension, looking at models adopted in Chile, UK and Australia.

Source: The Star

Retirement planning in Malaysia

Some of the facts/statistics quoted by industry players on retirement planning in Malaysia:

• 34% of Malaysians are putting aside money regularly for their retirement funds (not sure whether this includes EPF contributors)
• 99.9% of EPF contributors withdraw their savings in one lump sum
• 70% of these would use up their EPF savings within 3 years
• 72% of Malaysians claim to save for retirement
• 41% do not have concrete plan to build their retirement fund
• Among those who save for retirement, 77% are putting their money in low-yielding savings vehicles
• Most do not segregate their retirement savings from other savings
• Those who do, 83% would use the money should other needs arise
• 73% do not seek advice from financial professionals
• 39% intend to work beyond retirement age to boost income

Source: The Star

Insurers are cut off from EPF pension scheme

Insurance companies will not be involved in the proposed EPF pension scheme. The scheme will be managed by EPF.

The proposal for such a scheme will be ready in 4 months' time.

The proposed scheme would be compulsory for new members, for existing members, it is optional. There will be health benefits in the proposed scheme. Pension payments will be linked to last-drawn salary.

Source: The Star

Earlier stories:

Pension scheme for private sector employees

Views on EPF Pension

Views on EPF Pension

Various parties have provided their views on EPF pension:

Federation of Malaysian Unit Trust Managers

Believes it can play an important role in helping the people plan early for their retirement.

LIAM

Looks forward to discuss further with relevant parties to design a suitable retirement scheme for the private sector employees.

MTUC

Should have a minimum monthly pension (e.g. RM700) to take care of low-income contributors.

CAP

Against private companies running the scheme, EPF should run it, and it should be a voluntary scheme.

NUBE

Rejects the scheme.

Source: The Star 1 & 2

Pension scheme for private sector employees

The Human Resources Ministry is drafting a working paper for the Finance Ministry on a pension scheme for private sector employees. The aim is to ensure EPF savings last a lifetime.

The working paper would be ready in the next few months.

Source: The Star

22% opt to maintain EPF rate

22% or 1.23 mil out of the 5.64 mil EPF members chose to maintain their contribution rate at 11%.

By default, if a member does not submit a form to maintain his contribution rate at 11%, his contribution rate will be reduced to 8% for years 2009 and 2010.

Source: The Star

Re-employment to age 65

Singapore will not extend its current retirement age of 62 but would instead require employers to offer re-employment to workers at 62 for another 3 years until 65. The re-employment may be for a different job or at a different pay.

Singapore has also ruled out free healthcare as it will lead to uncontrollable and unsustainable demand for healthcare services.

Source: The Star

Prudential Retire-Meter 2008

Some of the findings from Prudential Retire-Meter 2008:

• 40% Malaysians felt the need to continue working after retirement due to insufficient retirement fund
• 36% of people were less confident about their retirement compared to last year
• 81% said inflation had gone up and affected their lifestyles
• 72% said they saved, 77% of this 72% invested in low-yielding savings vehicles
• 41% did not know how much was enough for retirement
• 64% did not separate retirement savings from other savings

The survey was based on 1,024 Malaysians from key urban centres in both East and West Malaysia, with a monthly household income of at least RM3,000.

Source: Business Times