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Is the Defined Benefit Pension Fund Sustainable in the Long Run?

In: Pension at Stake

Author

Listed:
  • Muhammad Irfan Abdul Rahman

    (Universiti Malaya)

  • Wee Yeap Lau

    (Universiti Malaya)

Abstract

This chapter explores the required return for the Malaysia Retirement Fund to maintain the pension scheme. In order to examine the fund's long-term sustainability, a scenario-based simulation has been used based on four inputs: contribution rate, retirement age, life expectancy, and years of service in civil servants in calculating the required return. This study simulates 560 scenarios to examine the required rate of return needed to fund this defined benefit pension based on four parameters: contribution rate, years of service, retirement age, and life expectancy. The current minimum service requirement of ten years is unsustainable, as pension funds will need a higher required rate of 50 per cent to sustain the pension benefit. As a policy suggestion, there is a need for the authority to set a minimum funding ratio for the KWAP pension fund to ensure its long-term sustainability.

Suggested Citation

  • Muhammad Irfan Abdul Rahman & Wee Yeap Lau, 2024. "Is the Defined Benefit Pension Fund Sustainable in the Long Run?," Springer Books, in: Pension at Stake, chapter 0, pages 89-118, Springer.
    • Handle: RePEc:spr:sprchp:978-981-97-2324-9_5
    DOI: 10.1007/978-981-97-2324-9_5
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