Case Study on the Employee Provident Fund of Malaysia
This paper documents the best practices and practical lessons learned from Malaysia’s largest mandatory public provident fund, the Employees Provident Fund (EPF). The objective of this paper is to increase the knowledge base of efficient pension fu...
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/197861540400101962/Case-Study-on-the-Employee-Provident-Fund-of-Malaysia http://hdl.handle.net/10986/30938 |
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okr-10986-309382021-05-25T09:19:42Z Case Study on the Employee Provident Fund of Malaysia World Bank Group PUBLIC PENSIONS SOCIAL PROTECTION PENSION FUNDS GOVERNANCE DISCLOSURE CAPITAL MARKET DEMOGRAPHICS This paper documents the best practices and practical lessons learned from Malaysia’s largest mandatory public provident fund, the Employees Provident Fund (EPF). The objective of this paper is to increase the knowledge base of efficient pension funds for developing countries, drawing from Malaysia’s experiences. Findings include key critical factors that contributed to the successof the EPF, from a small pension fund set up in 1949, to become one of the largest pension fund among developing countries and the 15th largest in the world. This paper summarizes the EPF’s key strategies in corporate governance, investment, and operational strategies, as well as policies deployed by the EPF in managing its assets. The lessons from the EPF come from three main factors. Firstly, the EPF has developed a strong governance structure which discourages external politicalmeddling and encourages transparency and accountability. Secondly, the EPF’s investments strategy, guided by its Strategic Asset Allocation, including diversifying to foreign markets and new asset classes, has enabled the Fund to produce enhanced returns. Thirdly, the EPF’s operational effectiveness which is driven by the professionalism of their employees and their continuous improvement for members’ benefit. Nonetheless, several challenges remain in the present and in the future. The first challenge involves demographic changes as Malaysia is ageing more rapidlythan other countries and even now a sizable number of workers do not have the recommended minimum savings level needed for retirement. A revamp of the current model is needed to ensure that members will be financially independent post-retirement. The second challenge is lack of coverage: only half of those in the labour force are contributing to the EPF, which leaves the other half without oldage pension coverage. A reform agenda needs to expand coverage particularly for the self-employed. The final challenges are maintaining public trust and staying relevant, especially in the age of the fourth industrial revolution and the emerging gig economy that has different needs and demands. This case study will hopefully be of benefit to both policy makers andpractitioners, particularly in the developing world. It could help play an important part in designing a successful provident fund to contribute to a comprehensive social safety net for citizens. 2018-12-04T19:21:34Z 2018-12-04T19:21:34Z 2018-06 Report http://documents.worldbank.org/curated/en/197861540400101962/Case-Study-on-the-Employee-Provident-Fund-of-Malaysia http://hdl.handle.net/10986/30938 English The Malaysia Development Experience Series; CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work :: Other Social Protection Study Economic & Sector Work East Asia and Pacific Malaysia |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
PUBLIC PENSIONS SOCIAL PROTECTION PENSION FUNDS GOVERNANCE DISCLOSURE CAPITAL MARKET DEMOGRAPHICS |
| spellingShingle |
PUBLIC PENSIONS SOCIAL PROTECTION PENSION FUNDS GOVERNANCE DISCLOSURE CAPITAL MARKET DEMOGRAPHICS World Bank Group Case Study on the Employee Provident Fund of Malaysia |
| geographic_facet |
East Asia and Pacific Malaysia |
| relation |
The Malaysia Development Experience Series; |
| description |
This paper documents the best practices
and practical lessons learned from Malaysia’s largest
mandatory public provident fund, the Employees Provident
Fund (EPF). The objective of this paper is to increase the
knowledge base of efficient pension funds for developing
countries, drawing from Malaysia’s experiences. Findings
include key critical factors that contributed to the
successof the EPF, from a small pension fund set up in 1949,
to become one of the largest pension fund among developing
countries and the 15th largest in the world. This paper
summarizes the EPF’s key strategies in corporate governance,
investment, and operational strategies, as well as policies
deployed by the EPF in managing its assets. The lessons from
the EPF come from three main factors. Firstly, the EPF has
developed a strong governance structure which discourages
external politicalmeddling and encourages transparency and
accountability. Secondly, the EPF’s investments strategy,
guided by its Strategic Asset Allocation, including
diversifying to foreign markets and new asset classes, has
enabled the Fund to produce enhanced returns. Thirdly, the
EPF’s operational effectiveness which is driven by the
professionalism of their employees and their continuous
improvement for members’ benefit. Nonetheless, several
challenges remain in the present and in the future. The
first challenge involves demographic changes as Malaysia is
ageing more rapidlythan other countries and even now a
sizable number of workers do not have the recommended
minimum savings level needed for retirement. A revamp of the
current model is needed to ensure that members will be
financially independent post-retirement. The second
challenge is lack of coverage: only half of those in the
labour force are contributing to the EPF, which leaves the
other half without oldage pension coverage. A reform agenda
needs to expand coverage particularly for the self-employed.
The final challenges are maintaining public trust and
staying relevant, especially in the age of the fourth
industrial revolution and the emerging gig economy that has
different needs and demands. This case study will hopefully
be of benefit to both policy makers andpractitioners,
particularly in the developing world. It could help play an
important part in designing a successful provident fund to
contribute to a comprehensive social safety net for citizens. |
| format |
Report |
| author |
World Bank Group |
| author_facet |
World Bank Group |
| author_sort |
World Bank Group |
| title |
Case Study on the Employee Provident Fund of Malaysia |
| title_short |
Case Study on the Employee Provident Fund of Malaysia |
| title_full |
Case Study on the Employee Provident Fund of Malaysia |
| title_fullStr |
Case Study on the Employee Provident Fund of Malaysia |
| title_full_unstemmed |
Case Study on the Employee Provident Fund of Malaysia |
| title_sort |
case study on the employee provident fund of malaysia |
| publisher |
World Bank, Washington, DC |
| publishDate |
2018 |
| url |
http://documents.worldbank.org/curated/en/197861540400101962/Case-Study-on-the-Employee-Provident-Fund-of-Malaysia http://hdl.handle.net/10986/30938 |
| _version_ |
1764473084501295104 |