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Malaysian derivatives market annually. To cater to this segment of the market, there may be a need to enable products with relevant underlying assets and contract sizes, including mini futures contracts. This will also need to be accompanied by efforts to enhance awareness of retail investors about derivatives trading and drive greater digitisation for the derivatives industry as well as talent development programmes by SIDC.
3.2 EMPOWERING INVESTORS FOR A BETTER FUTURE
In addition to becoming a high-income economy, Malaysia is also edging into an ageing nation status in the coming decade. These are among the key factors that will shape the financial well-being and retirement needs of Malaysians. As such, Malaysians will need to be empowered as they look to accumulate wealth and prepare for retirement. This includes having the knowledge to invest, information to make decisions, access to products and services as well as options to compare and diversify – all of which are powerful components of the investor experience that will shape the future. Market intermediaries must offer a seamless, convenient and safe investing experience. This section looks at the development needs over the next five years to better empower Malaysian investors to invest for their future.
STATE OF PLAY
A sizeable segment of the Malaysian population lacks adequate savings for retirement. Of the total labour force in Malaysia, only 48% rely on their EPF savings as the main source of income for retirement. Many self-employed Malaysians, constituting ~41% of the labour force are not covered by existing social protection programmes5. Of the active EPF members, ~68% do not have the minimum basic savings of RM240,0006 for retirement, and 70% of those aged 54 and above have less than RM50,0007. This is the result of low levels of financial and investment literacy, the lack of retirement planning as well as various socio-economic factors. Some Malaysians have indicated the need for financial advice or assistance to prepare for retirement8. However, many still display short-sighted tendencies with regards to setting aside savings to meet future needs or emergency expenses9.
The intermediation of savings in Malaysia is largely conducted through GLICs, followed by banks and the asset management industry. GLICs, which intermediated ~53% of private savings between 2013 and 201910, have undertaken various efforts to encourage greater retirement savings. This includes enabling retirement advisory services, broadening investment products and channels such as micro-investing and top-up options, as well as catering to the broader informal sector such as gig workers and housewives. With a large majority of Malaysians taking up deposit products compared to investment products, banks intermediate ~31% of private savings while the asset management industry11 intermediates ~16% of private savings.
Based on data from DOSM, EPF and Public Service Department, 2017.
RM240,000 is the recommended basic savings by EPF. This is equivalent to an income of RM1,000 a month for 20 years post- retirement, which is based on the current minimum monthly public pension of RM1,000 and the average life expectancy post-retirement.
Social Protection Insight: A Better Tomorrow, EPF, 2018.
Retirement Preparedness and Productive Ageing Among Government Employees and Retires in Klang Valley, Malaysia Institute of Ageing, Kumpulan Wang Persaraan (Diperbadankan) (KWAP), 2018.
Financial Capability and Inclusion Demand Side Survey, BNM, 2018.
10 BNM; SC; Annual reports of GLICs, including EPF, Permodalan Nasional Bhd (PNB), KWAP and Khazanah, 2013-2019.
11 Excluding figures from PNB.
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CAPITAL MARKET MASTERPLAN 3
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