Retirement Trends Among PERKESO Contributors: Economic and Social Implications for Malaysia and Policy Insights from Long-term Ageing Governance Experience

Abstract

Malaysia is increasingly confronting what demographers describe as a silver wave, marked by a rapid rise in the proportion of older persons driven by sustained fertility decline, rising life expectancy, and shifts in population age structure. In 2024, the Department of Statistics Malaysia estimated that individuals aged 60 years and above accounted for 11.6 per cent of the total population, or approximately 3.9 million people. Concurrently, the total fertility rate declined to 1.7 children per woman in 2023, the lowest level in half a century and well below the replacement threshold of 2.1, placing Malaysia on the trajectory toward becoming an aged nation by 2040. This study provides a comprehensive analysis of the economic and social impacts of population ageing in Malaysia, with particular emphasis on retirement trends derived from contribution data from the Social Security Organisation (PERKESO). Using administrative contribution records, the analysis examines patterns of workforce exit, continued labour participation among older adults, and implications for labour supply and social security sustainability. The findings indicate that while population ageing presents significant economic risks including a shrinking workforce, potential constraints on GDP growth, increased pension liabilities, and rising healthcare and long-term care expenditure, which also present opportunities for productivity retention and inclusive growth through extended workforce participation. Although healthcare and elderly care spending currently accounts for a relatively small share of GDP, these expenditures are expected to rise substantially by 2040 in response to age-related demands. In order to situate these empirical findings within the context of a broader policy trajectory, this empirical analysis is complemented with institutional insights drawn from long-term ageing governance experience in Belgium. From a social perspective, a growing older population intensifies dependency ratios, placing pressure on families, communities, and public welfare systems. Challenges such as social isolation and age-unfriendly urban infrastructure further heighten vulnerability among older persons. Nevertheless, the study highlights the role of employment services, retraining initiatives, and community-based support in promoting social inclusion, dignity, and financial security in later life. PERKESO contribution data further reveal a rising trend of delayed retirement, reflecting both financial necessity and a willingness among older adults to remain economically active. Since this trend supports pension sustainability but underscores the need for flexible retirement policies, extended contribution mechanisms, and broader coverage for non-standard and gig employment, Belgium is introduced as an institutional reference point. As this country has already progressed further along the demographic ageing trajectory while operating within a comparable social security and labour market governance framework as Malaysia, its experience proves an analytically relevant case for contextualising Malaysian retirement trends. In Belgium, successive reforms have reconfigured the balance between early exit pathways and active end-of-career participation. This institutional reflection underscores the importance of policy sequencing, targeted incentives, and evidence-based design in avoiding unintended consequences such as deadweight loss or substitution effects. Overall, the study underscores the urgency of repositioning older persons not merely as dependents but as productive economic and social assets. Aligning labour market policies, employment services, healthcare systems, and urban planning with demographic realities will be critical to ensuring Malaysia’s long-term economic resilience and social cohesion in an ageing society.