Springer Nature is making SARS-CoV-2 and COVID-19 research free. View research | View latest news | Sign up for updates

Poverty and Income Replacement Profile Among EPF Retiree in Malaysia

  • 325 Accesses

  • 2 Citations


Social security policies often focus on replacement rates, which indicate retirement income or social security benefits in relation to preretirement income. The higher replacement rate among the pensioners would ensure that the ageing society would have sufficient income to lead a normal life after retirement. This study examined factors that influencing the income replacement rate of Malaysian Employee Provident Fund (EPF) retirees. The analysis was based on a nationwide survey conducted in 2013–2014 among EPF retiree. A logit model was used to evaluate the likelihood of selected socio-demographic and economic factors contributing to income of the retirees. The results indicated that around 62 % of elderly has lower retirement income compared to their preretirement income and it makes them more vulnerable to unpredictable events and financial conditions. The study suggested that the income replacement rate of elderly could be strengthened by investing in ageing workforce, raising retirement age, enhancing educational achievements of low income groups and restructuring employment. These may in turn increase the availability of skilled workers, enhancing the national productivity, increase the income security of retirees, reduce poverty, and develop economic growth of the country.

This is a preview of subscription content, log in to check access.

Fig. 1
Fig. 2
Fig. 3


  1. Bakar, S. H. A., & Yunus, F. (2000). Social security policies in Malaysia: the Employees’ Provident Fund (EPF) and Social Security Organization (SOCSO). In R. Omar & J. Dolling (Eds.), Issues and challenges of social policy East & West (pp. 187–219). Kuala Lumpur: University of Malaya Press.

  2. Bardasi, E., Jenkins, S. P., & Rigg, J. A. (1999). Documentation for derived current and annual net household income variables, BHPS waves 1–7. Working paper 99–25. Colchester: Institute for Social and Economic Research, University of Essex. http://www.iser.essex.ac.uk/pubs/workpaps/wp. Accessed June 8, 2015.

  3. Barrientos, A. (2007). Livelihood strategies for old age income security; strengthening the co-functioning of formal and informal protection. Background Paper for the World Economic and Social Survey. Brighton: University of Sussex.

  4. Beattie, R. (1998). Pension systems and prospects in Asia and the Pacific. International Social Security Review, 51(3), 63–87.

  5. Caraher, K. (2000). Issues in incomes provision for the elderly in Malaysia. In The year 2000 international research conference on social security, Helsinki, September 25–27, 2000.

  6. Caraher, K. (2003). There is more to a decent income in lengthening old age than individual savings: A discussion of income security for old age in Singapore and Malaysia. In 4th International research conference on social security. Antwerp, May 5–7, 2003.

  7. DOS. (2014). Population Statistics. Malaysia Economics Statistics. Department of Statistics. https://www.statistics.gov.my/dosm/uploads/files/3_Time%20Series/Malaysia%20Time%20Series%202013/21Perangkaan_Penduduk.pdf. Accessed October 27, 2015.

  8. EPF. (2014). Annual report 2014, Ministry of Finance Malaysia. http://www.kwsp.gov.my/portal/en/about-epf/investment-highlights/annual-report/annual-report-2014. Accessed June 8, 2015.

  9. ILO. (2010). World social security report 2010/11. Geneva: International Labour Office.

  10. Kock, H., & Folk, J. Y. (2011). Expected retirement age: A determinant of financial planning preparation in Malaysia. African Journal of Business Management, 5(22), 9370.

  11. Lerman, R. I. (1997). Meritocracy without rising inequality? Wage rate differences are widening by education and narrowing by gender and race. Economic restructuring and the job market no. 2. Washington: The Urban Institute. http://files.eric.ed.gov/fulltext/ED426119.pdf. Accessed June 9, 2015.

  12. New Economic Model. (2009). New economic model for Malaysia: Part 1. Putra Jaya: National Economic Advisory Council.

  13. Samad, S. A., & Mansor, N. (2013). Population ageing and social protection in Malaysia. Malaysian Journal of Economic Studies, 50(2), 139–157.

  14. Social Security Organization. (2015). Social security principles. Retrieved from http://www.perkeso.gov.my/en/social-security-protection/social-security-principles.html.

  15. Springstead, G., & Biggs, A. G. (2008). Alternate measures of replacement rates for social security benefits and retirement income. Social Security Bulletin, 68(2), 1–19.

  16. Tenth Malaysian Plan. (2010). Tenth Malaysia Plan 2011–2015. Putrajaya: The Economic Planning Unit, Prime Minister Department.

  17. Tolos, H., Wang, P., Zhang, M., & Shand, R. (2014). Retirement systems and pension reform: A Malaysian perspective. International Labour Review, 153(3), 489–502.

  18. Tung, L. C., & Comeau, J. D. (2012). Perceived benefits and drawbacks of the retirement age policy in Malaysia: HR perspective. International Journal of Business and Management, 7(19), 1–15.

  19. Vlachantoni, A., & Falkingham, J. (2011). Exploring gender and pensions in Japan, Malaysia and Vietnam (CRA Discussion Paper No. 1101). Retrieved from http://eprints.soton.ac.uk/174799/1/CRA_DP_1101.pdf.

  20. Williamson, J. B., & Pampel, F. C. (1998). Does the privatisation of social security make sense for developing nations? International Social Security Review, 51(4), 3–31.

  21. Yacoob, M. F. (2000). Formal old age financial security schemes in Malaysia. In J. Doling & R. Omar (Eds.), Social Welfare East and West: Britain and Malaysia. Aldershot: Ashgate.

Download references


This work was prepared under research Project FL001G-13BIO/UM Grant at University of Malaya (UM).

Author information

Correspondence to Negin Vaghefi.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Vaghefi, N., Kari, F. & Talib, M.A. Poverty and Income Replacement Profile Among EPF Retiree in Malaysia. Soc Indic Res 132, 1065–1078 (2017). https://doi.org/10.1007/s11205-016-1326-1

Download citation


  • Social security
  • Employees Provident Fund
  • Ageing society
  • Replacement rate