Pension Adjustment Mitigates Impact Of Ageing Population Says Economist

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Economist Idham Razak said an ageing nation puts a lot of pressure on the economy. (Rawpixel pic)
PETALING JAYA: The pension adjustment via the new remuneration system for civil servants (SSPA) and recent increase in allocation for welfare aid can help cushion the impact of a declining economy due to an ageing nation, an economist says.
Idham Razak of Universiti Teknologi Mara said these two initiatives would put more money in the hands of retired civil servants, thus boosting their spending power.
He said this would allow them to cover their necessities more easily, freeing up their time and energy to be more involved in the community, such as through volunteer programmes which could in turn boost national productivity.
“Given their extensive experience and expertise, retired civil servants can serve as mentors or advisers in their fields. This can help improve the quality of the young workforce, boosting national productivity.

“Also, when senior citizens are more active, it can reduce their dependence on the welfare system. In giving back to society, they would be helping the government reduce its costs by leading a better quality of life.
“An ageing nation puts a lot of pressure on the economy, especially in maintaining a good health-adjusted dependency ratio,” Idham told FMT.
The health-adjusted dependency ratio or HADR is a measurement of the social and economic burden of ageing, based on the ageing-related health of the adult population.
Malaysia is expected to become an ageing nation by 2030, when 15% of the population will be elderly, and an aged society by 2044.
Prime Minister Anwar Ibrahim announced earlier this year that civil servants would be receiving salary increments of between 7% and 15% under the SSPA. Phase 1 began on Dec 1 and Phase 2 will start on Jan 1, 2026.
The salary increments will also see an increase in the pensions that retirees are entitled to.
Anwar also announced under the 2025 budget an allocation of RM1 billion to ensure the welfare of the elderly, for monthly allowances and the running of care centres.
Anwar also said that welfare aid for the elderly would be increased to RM600 a month from the current RM500.
Idham said the SSPA and allocation of welfare aid would help the country achieve fiscal and economic sustainability in the long run.
He said such sustainability was vital to reducing the pressure on public spending.
“It also has the potential to spur a more inclusive economy,” he said.
Idham said when a senior citizen’s quality of life improved, Putrajaya would be able to allocate more resources for developing public healthcare and social services, instead of having to look after severely dependent elderly folk.
Ahmed Razman Abdul Latiff of Putra Business School meanwhile said that the pension adjustment was needed to ensure increased productivity.
He said the government must safeguard the quality of life, especially for senior citizens. - FMT

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