WHAT happens when one in five Malaysians is elderly but has no pension? This question is no longer hypothetical.

By 2044, over 14% of Malaysians will be aged 60 and above. This demographic shift is not just a statistic, it is a signal that our current pension system, built for a younger and more uniform workforce, must evolve to meet the needs of a more diverse and ageing population.

Consider the story of Mak Limah, a 62-year-old market vendor in Kelantan. She has worked tirelessly for decades but never contributed to a formal retirement scheme.

Her income was just enough to get by, and now, with no retirement savings, she relies on her children for support.

Or take Abu, a gig driver in Kuala Lumpur, who earns daily wages but has no access to structured retirement planning.

These are not isolated stories; they reflect the reality of millions of Malaysians who live without the safety net of retirement income.

A basic pension scheme – what experts call a “Tier 1” system, may sound technical, but at its heart, it is a simple idea: everyone contributes a small portion of their income during their working years, and when they retire, they receive a steady stream of income to help them live with dignity.

It is like planting a tree early in life so that one day, you can rest in its shade. In many countries, basic pension systems are already well established.

Take Canada, for instance. Its Canada Pension Plan (CPP) is a mandatory, contributory scheme for all employed and self-employed individuals aged 18 and above who earn more than C$3,500 annually.

Employees contribute 5.95% of their pensionable earnings, matched by their employers, while self-employed individuals contribute the full 11.9%.

These contributions are managed by the Canada Pension Plan Investment Board and converted into monthly retirement income.

As of 2025, the average monthly payout at age 65 is about C$844.53, with a maximum of C$1,433.

While it is not designed to make anyone wealthy, this income helps retirees cover essentials like food, rent and healthcare, offering a sense of security without relying entirely on family or public assistance.

It is a model of shared responsibility that Malaysia could adapt to strengthen its own retirement framework.

Japan offers a similarly inclusive approach through its national pension system called Kokumin Nenkin.

This scheme is compulsory for all residents aged 20 to 59, including part-time workers, students, and small business owners.

Contributions are fixed at 17,510 Japanese yen per month (around US$118), regardless of income. After contributing for at least 10 years, individuals become eligible for the old-age basic pension at age 65.

Those who contribute for the full 40 years can receive up to 66,250 Japanese yen monthly (about US$450). To ensure no one is left behind, the government provides subsidies and exemptions for low-income earners.

This structure ensures broad coverage and reflects a national commitment to retirement dignity, regardless of employment type.

It is a system built on inclusivity and shared responsibility.

Encouragingly, Malaysia is taking positive steps to support informal and gig workers.

The Employees Provident Fund (EPF) offers voluntary savings programmes like i-Saraan and i-Suri, with government matching contributions of up to RM600 and RM300 a year.

The Social Security Organisation’s (Socso) Self-Employed Social Security Scheme (SKSPS) is mandatory under the Gig Workers Act 2025, with up to 70% of contributions subsidised for first-time participants.

However, we are still in the process of strengthening the overall retirement system. At present, coverage is uneven.

Civil servants benefit from government-funded pensions, but many others remain outside the safety net.

Consider the nasi lemak seller who starts work before dawn, or the Grab driver who spends long hours on the road to support a family. These individuals contribute meaningfully to society yet often face retirement without formal support.

This situation is not ideal, especially as our population grows older. By 2054, for every 100 working-age Malaysians, there will be 51 older individuals who may need some form of assistance.

This dependency ratio will place heavy pressure on families and public resources.

Currently, only one-third of Malaysians aged 15 to 64 are enrolled in a mandatory retirement scheme.

That means the majority are not saving enough (or at all), for their later years. Without timely reform, we risk a future where many elderly Malaysians face financial hardship, and the younger generation is left to shoulder the burden.

A Tier 1 basic pension scheme could help address this. It encourages consistent saving, even in small amounts, and promote financial literacy from an early age.

It also reduces reliance on government aid, allowing public funds to be directed to other essential services like healthcare and education.

For such a system to succeed, it must be inclusive and adaptable. It should welcome everyone; whether a teacher, a tailor, or a TikTok creator.

Contributions should reflect what people can reasonably afford, with government support for those with lower incomes.

Transparency in how funds are managed is also key to building public confidence.

Undoubtedly, there will be practical challenges. Many informal workers have irregular incomes or limited access to banking.

That is why we need creative, accessible and pragmatic solutions such as mobile apps for micro-contributions or community outreach to explain how the system works.

Trust is essential. People need to feel confident that the system will support them when the time comes. This means strong governance, clear communication and regular updates on fund performance.

Ultimately, this is about more than just financial planning. It is about the kind of society we want to become.

Do we want to grow into a nation that values and supports its elders, or one where they are left to fend for themselves?

Do we expect our children to carry the burden alone, or do we share it together?

This is where the spirit of solidarity must lead; a quiet pledge between generations to support one another, so that care is not a burden borne alone, but a bond gracefully shared.

A Tier 1 basic pension is not a handout.

It is a commitment – that if you work hard and contribute, you will not be forgotten.

It is a way to honour those who helped build the country and to ensure that future generations can age with dignity and peace of mind.

The time to act is now. Let us build a system that reflects our values; fair, caring and forward-looking.

Because everyone deserves to grow old with dignity and no one should have to do it alone. Retirement should not be a privilege reserved for a few.

It must be our collective promise – that those who build this nation will never be left behind.

Disclaimer: KWAP shall not be responsible or liable for any error, omission, inaccuracy of the information, or for any reliance or usage of all or any part of this article whatsoever. All information contained herein is provided on an “as is basis”.

By Kumpulan Wang Persaraan (Diperbadankan) (KWAP) chief strategy and services officer Nazaiful Affendi Zainal Abidin, and vice-president in the office of the chief executive officer Wan Najwa Wan Sulaiman.