IS THE KWAP DEFINED BENEFIT PENSION FUND SUSTAINABLE IN THE LONG RUN?
The Retirement Fund Incorporated (KWAP) manages the civil servant pension fund. It is a statutory body governed by the Ministry of Finance to manage Malaysia’s civil employees’ pension scheme. In order to examine the fund’s long-term sustainability, this study simulates 560 scenarios to examine the...
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| Format: | Article |
| Language: | English |
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Universiti Utara Malaysia
2023-06-01
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| Series: | The International Journal of Banking and Finance |
| Subjects: | |
| Online Access: | https://e-journal.uum.edu.my/index.php/ijbf/article/view/17719 |
| _version_ | 1827917237939339264 |
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| author | Wee Yeap Lau Muhammad Irfan Abdul Rahman |
| author_facet | Wee Yeap Lau Muhammad Irfan Abdul Rahman |
| author_sort | Wee Yeap Lau |
| collection | DOAJ |
| description |
The Retirement Fund Incorporated (KWAP) manages the civil servant pension fund. It is a statutory body governed by the Ministry of Finance to manage Malaysia’s civil employees’ pension scheme. In order to examine the fund’s long-term sustainability, this study simulates 560 scenarios to examine the required rate of return needed to fund this defined benefit pension based on four parameters, namely contribution rate, years of service, retirement age and life expectancy. Our results show: First, the minimum years of service for pension eligibility should be increased to 20 years. Second, a contribution rate of at least 13 percent per worker to KWAP is needed. Third, there are no significant changes in the required rate of return even though the retirement age is extended from 55 to 60. Fourth, this study shows that the contribution period is more crucial than the post-retirement period for the sustainability of the pension fund. 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.
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| first_indexed | 2024-03-13T03:25:56Z |
| format | Article |
| id | doaj.art-169b78dee5e74c0d83eeeef464a1028d |
| institution | Directory Open Access Journal |
| issn | 2811-3799 2590-423X |
| language | English |
| last_indexed | 2024-03-13T03:25:56Z |
| publishDate | 2023-06-01 |
| publisher | Universiti Utara Malaysia |
| record_format | Article |
| series | The International Journal of Banking and Finance |
| spelling | doaj.art-169b78dee5e74c0d83eeeef464a1028d2023-06-25T07:45:56ZengUniversiti Utara MalaysiaThe International Journal of Banking and Finance2811-37992590-423X2023-06-0118210.32890/ijbf2023.18.2.5IS THE KWAP DEFINED BENEFIT PENSION FUND SUSTAINABLE IN THE LONG RUN?Wee Yeap Lau0Muhammad Irfan Abdul Rahman1Malaysia-Japan Research Centre Universiti Malaya, MalaysiaFaculty of Business and Economics, Universiti Malaya, Malaysia The Retirement Fund Incorporated (KWAP) manages the civil servant pension fund. It is a statutory body governed by the Ministry of Finance to manage Malaysia’s civil employees’ pension scheme. In order to examine the fund’s long-term sustainability, this study simulates 560 scenarios to examine the required rate of return needed to fund this defined benefit pension based on four parameters, namely contribution rate, years of service, retirement age and life expectancy. Our results show: First, the minimum years of service for pension eligibility should be increased to 20 years. Second, a contribution rate of at least 13 percent per worker to KWAP is needed. Third, there are no significant changes in the required rate of return even though the retirement age is extended from 55 to 60. Fourth, this study shows that the contribution period is more crucial than the post-retirement period for the sustainability of the pension fund. 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. https://e-journal.uum.edu.my/index.php/ijbf/article/view/17719Civil servicepension fundMalaysiainvestment performanceinternal rate of returnscenario analysis |
| spellingShingle | Wee Yeap Lau Muhammad Irfan Abdul Rahman IS THE KWAP DEFINED BENEFIT PENSION FUND SUSTAINABLE IN THE LONG RUN? The International Journal of Banking and Finance Civil service pension fund Malaysia investment performance internal rate of return scenario analysis |
| title | IS THE KWAP DEFINED BENEFIT PENSION FUND SUSTAINABLE IN THE LONG RUN? |
| title_full | IS THE KWAP DEFINED BENEFIT PENSION FUND SUSTAINABLE IN THE LONG RUN? |
| title_fullStr | IS THE KWAP DEFINED BENEFIT PENSION FUND SUSTAINABLE IN THE LONG RUN? |
| title_full_unstemmed | IS THE KWAP DEFINED BENEFIT PENSION FUND SUSTAINABLE IN THE LONG RUN? |
| title_short | IS THE KWAP DEFINED BENEFIT PENSION FUND SUSTAINABLE IN THE LONG RUN? |
| title_sort | is the kwap defined benefit pension fund sustainable in the long run |
| topic | Civil service pension fund Malaysia investment performance internal rate of return scenario analysis |
| url | https://e-journal.uum.edu.my/index.php/ijbf/article/view/17719 |
| work_keys_str_mv | AT weeyeaplau isthekwapdefinedbenefitpensionfundsustainableinthelongrun AT muhammadirfanabdulrahman isthekwapdefinedbenefitpensionfundsustainableinthelongrun |