Abstract
The topic of EPF sustainability has gained considerable attentions among the governments worldwide. In the wake of growing elderly population, improving life expectancy and declining mortality rate particularly in Malaysia over the years, concerns arise on the EPF’s failure to fully commit the retirement incomes provision to the elderly population in the post-retirement periods. Specifically, this paper examines the short run and long run relationships between EPF balances and its determinants; investment earnings, nominal income, elderly population, life expectancy and mortality rate from 1960 to 2014. Of the findings, elderly population and mortality rate are unfolded to represent key deterrents of EPF balances, which acts as the proxy for the EPF sustainability, both in the short run and long run cycles. Thus, new improvements to the existing EPF scheme are recommended as means to alleviate the poverty problems among the elderly population besides addressing other economic and social fronts.
Highlights
The employees provident fund (EPF) scheme, which is established in 1951, represents a defined contribution (DC) plan that provides financial security to the elderly population especially coming from the formal private sectors in Malaysia (Narayanan, 2002)
There is no empirical evidence from the previous studies that are successfully found on the short run and long run relationships between EPF sustainability, which is represented by EPF balances, and possible determinants; investment earnings, nominal income, elderly population, life expectancy and mortality rate
This indicates that the explanatory variables namely investment earnings, nominal income, elderly population, life expectancy and mortality rate are collectively moving together with EPF balances to attain the long run steady-state notwithstanding that there may be temporary deviation spots to occur in the short run
Summary
The employees provident fund (EPF) scheme, which is established in 1951, represents a defined contribution (DC) plan that provides financial security to the elderly population especially coming from the formal private sectors in Malaysia (Narayanan, 2002). When touching on the concept of financial sustainability, there are multifaceted issues surrounding the pension schemes that need to be responsibly dealt by the governments notably in the East and South East Asian countries including Malaysia. Of which, these countries are put in the limelight since the nations are currently seen at advanced stages of the demographic transition from a youthful to an elder society (Anwar, 2015).
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