Home Ownership and Pensions in East Asia: The Case of Malaysia

Abstract

In the East Asian welfare model the income needs of older people are typically met by a combination of family support, pension systems and home ownership. Insofar as the latter two elements are concerned, and in comparison with the typical western country, pension systems are generally less well developed with more restricted social protection elements while home ownership rates are higher; indeed the trade-off, identified in western countries, between public pension provision and private home ownership is here even more extreme. The paper begins with a brief outline of the general features of the East Asian welfare model, emphasising some of the key distinctions from western models. The main part of the paper focuses on a case study of Malaysia. It firstly investigates the development of the pension and home ownership systems, the former based on private, mandatory savings through the Employees Provident Fund which has been progressively amended to enable ever large parts of each member’s fund to be diverted into pre-retirement payment for home ownership. Secondly, the paper investigates the extent to which the system has resulted in gains and losses for households seeking both to meet their housing requirements and enhance their post-retirement standard of living.