The statistics department projects that Malaysia’s old age dependency ratio would nearly triple from 7.4 in 2010 to 21.7 by 2040. This means that while it took roughly 13 workers to support one retiree in 2010, that burden will fall on just 4.6 workers by 2040.
But Malaysia is not alone in preparing for an ageing nation. FMT takes a look at how nations like Singapore, Germany and Sweden have re-engineered their systems to survive a shrinking workforce, as experts weigh in.
What Malaysia can learn from other countries
In Singapore, the Central Provident Fund’s (CPF) lifelong income scheme, or CPF Life, pools members’ savings into a collective fund. From this pool, retirees receive monthly payments for life, even if they live far beyond the average life expectancy.
Economist Nur Azreen Mokhyi of the Centre for Future Labour Market Studies said this scheme directly addresses longevity risks by combining individual savings with collective risk-sharing.
“This approach preserves individual ownership of savings while reducing the risk of outliving retirement funds, reflecting Singapore’s broader policy emphasis on self-reliance, disciplined savings, and clearly defined retirement adequacy thresholds,” she told FMT.
Sweden, meanwhile, has a notional defined contribution system that covers all workers, whether in the public or private sector. It operates on a pay-as-you-go basis, meaning today’s workers fund today’s retirees.
Sweden also actively encourages longer working lives where people remain employed beyond traditional retirement ages, ensuring high labour force participation and low unemployment.
“A key strength of the Swedish model is its built-in sustainability mechanism, which adjusts benefits in line with demographic and economic conditions, ensuring long-term balance between contributors and beneficiaries,” Azreen said.
As for Germany’s model, its statutory pension operates as a compulsory social insurance system funded on a pay-as-you-go basis, like Sweden.
Rather than accumulating savings, workers there earn pension “points” each year based on how their income compares with the national average. These points are recorded throughout their careers and later converted into a guaranteed monthly pension for life.
While Germany’s system offers stronger protection for lower-income earners, Azreen said, population ageing is an ongoing challenge that has led to periodic adjustments to contribution rates to maintain long-term sustainability.
She said these international models prove that retirement does not have to be individualistic, like Malaysia’s current EPF system, and that the conversation should shift from how much an individual can save to how much a society can share.
Mounting urgency for reforms
Azreen said Malaysia’s key challenge is structural stagnation. “Without reforms that strengthen the retirement income dimension, population ageing and more fragmented employment patterns risk widening the gap between Malaysia and higher-performing pension systems,” she said.
Khazanah Research Institute deputy research director Christopher Choong suggested that one core issue is the fundamental mismatch between Malaysia’s savings model and labour market.
“The ability to contribute to a retirement scheme depends on the wages you get. A defined contribution model such as EPF is a reflection of the wage levels and the wage structure in our labour market,” he said.
“When you have a situation where the wage structure is highly unequal, this will be reflected in the skewed distribution of savings in EPF.”
Choong also said there is mounting urgency for comprehensive reforms, while the excuse that Malaysia “can’t afford it” is a myth.
“For a country at Malaysia’s level of economic development, we can actually mobilise more resources.
“Fiscally sustainable does not necessarily mean a reduction in government fiscal spending. It is about ensuring the government’s responsibility can be carried out sustainably,” he said.