An Overview of the Pension System in Malaysia

This chapter discusses the historical development of Malaysia’s Civil Servant Pension, followed by the Five-Pillar Model proposed by the World Bank in 2008, and the introduction of the three main bodies that manage pension schemes, namely Kumpulan Wang Persaraan (Diperbadankan), or Retirement Fund (Incorporated), better known as KWAP; Kumpulan Wang Simpanan Pekerja (KWSP) or Employee Provident Fund (EPF) and Lembaga Tabung Angkatan Tentera (LTAT) or Armed Forces Fund Board. This chapter also discusses the pension system reform effort and the establishment of KWAP in the last few years. This chapter further outlines and discusses the pension system’s four issues: longevity risk, increasing financial obligation to the Malaysian Government, an increasing number of civil servants exacerbating pension expenditure, and household debt among pensioners.