Malaysia has no state pension. The private sector contributes to a Provident Fund (“EPF”). Social security only covers employment related incidents. In the absence of a first pillar, life insurance penetration is slowly growing with higher per capita GDP.

Pension System

Occupational pension system only covers the civil servants – including police, health workers and the armed forces. There is no state pension or old age pension. For the private sector, they and their employer contribute a mandated % of salaries into the Employees’ Provident Fund (“EPF”). Some employers have top up schemes, usually lump sum gratuities. Social security benefits cover employment related injuries and deaths provided under membership of Social Security Organization (SOCSO).

Insurance Market

Insurance penetration is slowly but surely growing with higher per capita GDP, and is a key component of the government’s development master plan. Notably, Malaysia also has an active takaful, i.e. shariah compliant insurance market, in both the family(life) and general space. Firms are well capitalized under a risk based capital framework and are regulated by the Central Bank. Malaysia is one of the few countries with takaful specific regulations in place.