One aspect of economic policy that is easiest to predict is population ageing and the fuse of this time-bomb has already been smouldering for many years in Malaysia.

The United Nations defines a society as “ageing” when over 7% of its population is 65 years or older and “aged” when more than 14% are above this level. Malaysia is already an ageing society and will become an aged society only 15 years from now.

After that Malaysia will head towards a “super-aged” society when over 20% of the population is above 65 years old, as we already see in Japan.

In Malaysia, a more relevant benchmark is the increasingly useless “official retirement age” of 60 years old.

According to the department of statistics, 11.6% of the population, or 3.9 million people, are aged 60 and above. By 2040, 17.3% of the population, or 6.4 million people, will be aged 60 and above.

This poses significant policy challenges with greater demand on healthcare systems and social wellbeing, including retirement incomes, elderly care and medical services.

Reduced labour force participation and lower productivity among older workers place a higher burden on younger generations to create economic growth. The caregiver burden also rises as unprepared families struggle to provide adequate care for ageing relatives.

Insufficient infrastructure and amenities for elderly care, particularly in rural areas, makes this worse and holds down the quality of life for older adults and their caregivers.

While there are opportunities in the so-called, “Silver Economy”, with lifestyle options, services and accommodation tailored to the needs of pensioners, the reality is that many older Malaysians and their families do not have adequate retirement savings or income to take advantage of this.

We have known this for a long time with data from EPF telling us that as many as 97% of their members have inadequate savings and less than 20% are saving enough to meet even basic pension levels. In addition, with 7.2 million people of working age outside of the workforce the pension crisis is clearly with us.

Standard responses by international agencies of working longer or saving more do not work in Malaysia where incomes are structurally low and stagnant, and people are forced to continue to work after they reach 60 years old anyway.

A non-contributory scheme is therefore essential but the screams from well-pensioned minorities that this is unaffordable is drowning out rational debate.

Some simple math helps. If there are 3.9 million pensioners, among whom are 900,000 civil servants who have their own scheme, then the current pension-eligible population is three million. If we exclude the wealthiest T20 then we get 2.4 million people.

A basic pension of RM1,000 per month based on the EPF minimum estimate would cost RM28.8 billion, less than what the government spends on civil service pensions.

Combining savings from economic reform raises RM24.5 billion, including RM7.5 billion from diesel, RM8 billion from RON95, RM4 billion from electricity tariff reform and RM5 billion from SST changes. So just this would cover 85% of the bill.

Alternatively, a 1% electronic payments tax (EPT) can raise the full RM28.8 billion directly or a Malaysian Superfund could raise RM50 billion, almost twice what is necessary. Both of these would pay for a basic pension without disturbing current spending plans.

So the government has a choice, to build a legacy on a basic pension or to continue patronage cascades spending taxpayers’ money on vested interests.

With the next election in the balance, the “Silver Economy” and the “Silver Vote” might be a better target group than the bigwigs.

The views expressed are those of the writer and do not necessarily reflect those of FMT.