FIN533 : PERSONAL FINANCIAL PLANNING

GROUP PROJECT ASSIGNMENT

TITLE : CONSUMER CREDIT & RETIREMENT PLANNING

GROUP MEMBERS:
NAME STUDENT ID

NURUL AZWIN BINTI YUSOFF 2021480434

NURUL HAZIRAH BINTI SAMARI 2021858522

NURUL IZZATI BINTI ZAHAIRUL ANUAR 2021480674

FARHANA BINTI SALIM 2021813412

PREPARED FOR : MADAM ROHANIZAN MD LAZAN

DATE OF SUBMISSION: 2nd JANUARY 2023

 ACKNOWLEDGEMENT

We would like to begin by expressing our gratitude to the Almighty God for the unending grace,
direction, and protection that He has provided for us during the entirety of our endeavour.

Following that, we would like to extend our most sincere gratitude to Madam Rohanizan for the
instruction she has provided to us throughout this semester, which has allowed us to finish this
report. We have been really moved by her dynamism, her vision, her sincerity, and her motivation.
She instructed us in the approach that should be used to carry out the research and to report the
findings of the research in the clearest possible manner.

Then, since we were able to finish this report within the allotted time frame, we would like to
express our gratitude to everyone of us individually. We were putting in a lot of effort to ensure
that this report was perfect when we finished it. We have high hopes that this report will educate
people on how to better manage their finances and plan for their retirement. We pray that all of the
information we absorb during the course of doing this investigation will be firmly lodged in our
minds and hearts forever.

In conclusion, we would like to extend our sincere gratitude to the parents, siblings, and classmates
who assisted us by providing responses to a few questions pertaining to this topic.
 TABLE OF CONTENT

Contents
1.0 INTRODUCTION & BACKGROUND .................................................................................. 1
1.1 PURPOSE ......................................................................................................................... 4
2.0 CONSUMER CREDIT .......................................................................................................... 6
2.1 IMPORTANCE OF CONSUMER CREDIT ....................................................................... 6
2.2 CURRENT ISSUE RELATED CONSUMER CREDIT ....................................................... 8
2.3 STATISTICAL INFORMATION BETWEEN MALAYSIA AND OTHER COUNTRIES .... 9
3.0 RETIREMENT PLANNING ................................................................................................11
3.1 IMPORTANCE OF RETIREMENT PLANNING ..............................................................11
3.2 CURRENT ISSUE IN MALAYSIA RELATED RETIREMENT PLANNING .....................14
3.3 STATISTICAL INFORMATION BETWEEN MALAYSIA AND OTHER COUNTRIES ...16
4.0 CONCLUSION ....................................................................................................................18
5.0 RECOMMENDATIONS ......................................................................................................19
REFERENCES .........................................................................................................................20
1.0 INTRODUCTION & BACKGROUND

CONSUMER CREDIT
Most people already know that credit is an agreement to get money, goods, or services immediately
in exchange for deferred payment. As opposed to commercial and agricultural credit, consumer
credit is extended to individuals and families so that they may meet their own financial obligations.
Although the focus here is on how credit affects ones personal finances, as a business owner, both
personal and company's financial situations are inextricably connected. As a result, the health of
both the business and personal credit are intertwined. The personal credit might be affected if the
company runs into financial difficulties due to excessive debt. On the opposite side, if the
consumer have a lot of personal debt, their business creditors may be less reluctant to extend credit
to your company since they may view the personal guarantee as having little or no value.
Another method of categorising consumer credit involves the financial organisation that is
providing the loan. Consumer credit has historically been extended by thousands of different
organisations, but most may be placed into one of a few broad institutional categories, albeit with
some grey areas. The Federal Reserve Board collects data on the total amount of consumer credit
that is both available and in use, broken down by repayment type (revolving vs. non-revolving)
and institution type (bank, credit union, etc.). Some difficulties arise as markets and operations
develop over time, and some institutions in one charter category start acting more like those in
another.

TYPES OF CONSUMER CREDIT

● Installment Credit
It is distributed at a predetermined rate for a predetermined period of time in order to fulfil a
particular requirement. Payments are typically distributed in equal monthly instalments and are
made for significant purchases such as automobiles, home furnishings, and household appliances.
As an incentive to the consumer, instalment credit is typically extended at a lower interest rate than
traditional credit, and the item that is being purchased serves as guarantee in the event that the
consumer is unable to pay the instalment as agreed upon.

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 ● Revolving Credit
One good illustration of this would be credit cards, which can be utilised for any purchase. The
customer has the ability to use the credit up to its full level, and the line of credit will remain open
as long as the borrower continues to make the required minimum payment each month. This type
of credit is referred to as "revolving" credit. Since there is no protection to back up this particular
sort of credit, the interest rate that may be charged on it is significantly greater.

● Charge cards
A charge card is comparable to a credit card. But a key distinction is that the complete sum often
has to be paid in full each month. Charge cards often don't have a predefined credit limit like credit
cards. Instead, the card issuer permits purchases based on financial routines and behaviors. Many
consumers make the mistake of thinking that this kind of credit is the same as revolving credit.
The primary difference between a charge card and a credit card is that the former allows you to
carry a balance, while the latter requires that the entire balance be paid off at the end of each billing
cycle. If the sum is not paid in full and on time, there will be additional costs assessed as a penalty.
American Express is a well-known charge card that serves as an example of this type of card.
When it comes to avoiding debt from credit card purchases, this form of borrowing can be useful.

● Non-Installment or service credit

The borrower has the option of utilising this sort of credit in order to make a payment for a service,
membership, or other item at a later time using the funds that are available to them. Payment is
typically due one month after the service has been completed; however, accounts that have been
paid late are subject to additional fees, interest, or penalties. If payment is not received, the
consumer’s service will be cancelled, and this may be reported to a credit bureau, which will have
a negative influence on your credit score. However, if payment is received, the consumer’s service
will be recovered. In our day-to-day lives, contracts for services or goods that do not involve
instalments are a reasonably typical occurrence. Consumer’s service credit can be earned from a
variety of sources, including things like cell phones, gas, and electricity.

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RETIREMENT PLANNING
Retirement planning is the process of gaining knowledge about, choosing, and implementing
financial solutions that will enable individuals to save enough money for a comfortable and secure
retirement in the future. Planning for retirement requires establishing a desired level of income
during retirement and outlining the steps necessary to achieve that level. The process of planning
for retirement involves locating potential sources of income, estimating future costs, developing a
savings plan, and overseeing both assets and risk. Estimates of future cash flows are used to
determine whether or not the retirement income goal can be achieved.
Setting savings, income, and investment goals is part of retirement planning. Budgeting
involves calculating annual expenses, analysing revenue sources, saving strategies, and managing
things. It's never too early to start saving for retirement, but compound interest may increase the
rewards. Retirement planning estimates present and future cash flows to determine if one's
anticipated retirement income is attainable.
A retirement plan helps people maintain financial independence and security after
retirement by saving aside a portion of their earnings during their working years. Based on savings,
consumption, and retirement lifestyle, each person's retirement approach will be different.

RETIREMENT PLANNING SCHEMES

● EPF
To prevent additional damage to members' retirement security, the Employees' Provident Fund
(EPF) advocates against further withdrawals of EPF investments under the i-Citra plan and instead
emphasises its commitment to helping members rebuild their retirement income adequacy. The
primary function of the EPF is as a retirement fund, with the responsibility of protecting members'
retirement resources. The EPF has existed since 1951 and is administered by the EPF Act 1991,
which states that Account 1 is for retirement (70% of savings) and Account 2 is for discretionary
withdrawals (30% of savings) with the goal of securing a more comfortable retirement in the
future. However, the Act does not include any provision allowing withdrawals due to natural
disasters.

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 ● Reducing Expenses
Before entering retirement, it is recommended by financial experts that you replace 80 percent of
your income. This may seem like excellent advice when viewed from a broad perspective, but
putting it into practise may be an exceedingly challenging endeavour. The best course of action
would be to reduce the amount you spend each month and then reallocate the money you bring in
each month. If you are now able to get by on fifty percent of your salary, there is no reason why
you won't be able to do the same once you are in retirement. Therefore, you simply need to replace
fifty percent of your revenue rather than eighty percent of it.

● Diversifying savings and investment portfolio

In the process of getting ready for retirement, diversification is an essential stage. It is a smart
move to make investments in real estate as well as several forms of financial assets, in order to
provide the retirement fund expansion and protection against loss. This money should be
channeled into different forms of investment opportunities that give excellent interest returns in
order to make the most of any additional earnings or savings. Users would also need to have a
solid mix between low-risk investments like unit trusts and fixed deposits, on the one hand, and
high-risk investments like trading on the stock market, on the other. These safeguards stop
significant sums of money from being taken out of retirement accounts for things that do not have
anything to do with retirement, such as wasteful expenditures.

1.1 PURPOSE
• Consumer Credit
Consumer credit is typically made available to customers by financial institutions, retail
businesses, and other entities in order to facilitate immediate product purchases and the subsequent
interest-bearing repayment of the purchase price over time. In general, it can be broken down into
the following four categories: installments credit, revolving credit, charge cards, and non
instalment credit, sometimes known as service credit.
People are able to get a loan against their future earnings through the use of consumer
credit, which enables them to purchase products and services. In the event of a crisis, such as when
your automobile breaks down, this could save your life. The United States is rapidly transitioning
into a cashless society, with people increasingly relying on credit cards for both major and minor

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purchases. This is mostly due to the fact that credit cards are generally safe to carry around. A
profitable line of work is providing consumers with credit on an ongoing basis. The provision of
consumer credit is a service that can be obtained from a range of businesses, including department
stores, financial institutions, and banks.

• Retirement Planning
Inflation fighting, achieving retirement goals, and maintaining a certain level of life are three of
the many reasons why retirement planning is important. Planning for one's retirement is an
essential component in the fight against inflation. If inflation does occur in the future, the cost of
all goods and services, as well as the cost of life, will go up. Because of this, not only the nation
but also we are facing a significant challenge as our costs continue to rise day by day.

Individuals who are approaching retirement age can protect their ability to maintain their current
standard of living with the help of retirement planning. That is the way the planning for retirement
is carried out. The next objective of retirement planning is to ensure that the retirement objectives
are met. Because retirement is the opportunity to spend time with family by travelling or beginning
a new activity, it might feel like the beginning of a new journey. Therefore, the purpose of
retirement planning is to realise the objective of retiring comfortably by making effective use of
the money that has been set aside. Lastly, in order to preserve the current standard of living. It is a
means of maintaining one's existing standard of living up until one's retirement. As an illustration,
we should pay the car's monthly payment in order to guarantee that we will continue to have access
to the vehicle. Therefore, the preparation for retirement will assist you in finding ways to pay for
the car once you retire so that you may retain your current standard of living.

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2.0 CONSUMER CREDIT

Personal debt that is incurred for the purpose of making purchases of goods and services is an
example of consumer credit. Credit cards are a typical method of providing consumers with access
to credit. The term "consumer debt" can also be used to refer to consumer credit. Although personal
loans are included in the category of consumer credit, the term "consumer credit" is most
commonly used to refer to unsecured debt that is incurred in order to pay for day-to-day necessities
such as products and services.
When used appropriately, credit has the potential to be a helpful and effective financial
instrument. Credit is ingrained in the culture of the United States, from the most fundamental credit
card to the most complex mortgage or automobile loan. Credit cards are one of the most
extensively used payment methods, and cashless transactions are rapidly becoming the norm in
many areas. It is essential to have an understanding of credit in order to make effective use of
credit and avoid falling into the common financial trap of debt.

2.1 IMPORTANCE OF CONSUMER CREDIT

Credit is a financial term that enables financial transactions to take place in a timely manner, hence
contributing to the expansion of the economy. Credit ensures that businesses have access to the
resources they require in order to produce the goods that consumers buy. A company that does not
engage in the process of extending credit to its customers runs the risk of being unable to purchase
the machinery and raw materials, as well as pay its employees, that are necessary to manufacture
products and turn a profit.
The majority of people also have access to the means to buy the things they require since
credit is available. For instance, a house or a car are two examples of things that are typically quite
difficult to pay for all at once. They are able to buy these things with credit and pay for them over
time, incurring interest on the money they borrow.

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I. Emergency preparedness.
In the event that you are faced with unanticipated costs, such as a broken down automobile or
appliance, a revolving line of credit might come in very handy. Your ability to pay for necessary
expenses might be hindered if, for example, your car broke down or you needed a new refrigerator.
Customers who use credit are able to space out the payment of significant expenses over a period
of time that can range from a few weeks to several years. This frees them from the burden of
having to pick between purchasing a new transmission and putting food on the table.

II. Protecting consumer against fraud

Credit cards offer a wide variety of protections against fraud, including contactless cards, virtual
card numbers, card-locking capabilities, and very little or no liability for the cardholder in the
event of fraudulent purchases.

III. It is more flexible

You can choose payment plans that offer you immediate access to the products and services you
purchase, rather than having to save money for years in order to cover the cost of each transaction
in full. Consumers should also avoid putting off expenses like house repairs that may become more
expensive in the long run if they put them off for too long.

IV. More convenience

When people want to go out and about in today's world, they do not need to carry about a
significant amount of cash. When they headed out to do some shopping, all they needed to bring
along with them was their credit card. This is the more secure option, given that it is risky to carry
a large amount of cash around, given that unexpected things might happen at any time and
anywhere.

V. Building your credit history

If you establish a strong payment history for consumer credit accounts, such as credit cards and
personal loans, and if you handle credit responsibly in other aspects of your life, consumer credit
can be an extremely useful instrument for building your credit history.

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2.2 CURRENT ISSUE RELATED CONSUMER CREDIT

● Post-pandemic covid-19
The consumer credit ratings provided by Experian Information Services (Malaysia) have shown
moderate growth over the past four years, beginning with the pre-Covid year of 2019, across the
board for all age groups. The Experian i-Score, which is used to evaluate customers'
creditworthiness, increased to 619 in 2022 from 602 in 2019, indicating that people have taken
steps to better manage their credit portfolios in the face of the economic slowdown brought on by
Covid-19.
It indicates that people in Malaysia are getting back to the lifestyle they had before the
outbreak by using their credit cards more frequently in recent months. According to data provided
by Bank Negara Malaysia, outstanding balances on credit cards reached a record high of RM35.89
billion in July, marking the highest level seen since February 2020, when the sum reached
RM38.05 billion. This growth occurred for the third month in a row. This is an indicator that
consumers are relaxing their spending restrictions in order to make larger purchases. Additionally,
the inflationary pressure that has led to rising prices is also contributing to the overall sums that
are being spent, which means that overall amounts are growing.

● Consumer Act
Bank Negara Malaysia (BNM) plans to pass the Consumer Credit Act in 2022 with the intention
of strengthening regulatory provisions for all consumer credit activities. These provisions will
apply to providers of "Buy Now Pay Later" programmes as well as other consumer credit
businesses. Datuk Nor Shamsiah Mohd Yunus, the governor of Bank Negara Malaysia, stated that
the central bank would collaborate with the Ministry of Finance (MoF) and the Securities
Commission (SC) in order to enact the Act. She stated that although the BNM is collaborating with
the necessary authorities to monitor changes and educate the public about BNPL schemes, the
proportion of credit extended to families and the size of the schemes are still very small. It is
envisaged that the introduction of a Consumer Credit Act will take place in Budget 2021. The
purpose of this introduction is to create a legal framework for the issue of consumer loans and to
enhance control over non-bank credit providers.

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 The Consumer Credit Act (CCA) of Malaysia is based on the efforts of other countries to
reform their consumer credit markets. New Zealand (Credit Contracts and Consumer Finance Act
2003), South Africa (National Credit Act No. 34 of 2005), and Australia are only few of the
countries that have similar laws (National Consumer Credit Protection Act 2009). There is hope
that the CCA, once passed, will protect Malaysians who use credit from being subjected to
predatory or otherwise dishonest business practises in the marketplace. First and foremost, it will
facilitate the development of a uniform blueprint for the protection of credit consumers and the
implementation of a framework for companies that provide credit and credit services (including
non-bank entities). The CCA will also serve as the coordinating body for the many government
departments and organisations tasked with enforcing the new rules and regulations. As a result,
the consumer loan market should become more efficient over time.

2.3 STATISTICAL INFORMATION BETWEEN MALAYSIA AND OTHER

COUNTRIES

The graph above shows the recent value of

consumer credit in Malaysia. It shows that the
consumer credit in Malaysia is constantly
increasing by the month. The latest value
recorded was in September 2022, which
amounted to 452.9 billion Malaysian Ringgit.
Early this year, the consumer credit was 440.6
billion Malaysian Ringgit, increased from the year before which is, 434.2 billion Malaysian
Ringgit in November 2021.

This graph shows the longer historical series on

consumer credit in Malaysia, from the year 1996
to 2022. The graph shows Malaysia information on
that indicator from December 1996 to September
2022. During the period, the value of the
Malaysian Ringgit ranged from 56.74 billion to
452.89 billion on average.

On the other hand, the table below shows the current level of consumer credit, as well as how it
has changed recently for a few countries, including Malaysia. The numbers are in billions of the
local currency, and they are always changed to reflect the most recent national reports.

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The table covers loans given out by commercial banks to individuals and households for the
purpose of purchasing goods and services,but does not include loans for the purchase of real estate,
in terms of one billion of the country's currency units. Among all other countries, Malaysia’s
consumer credit indicates a positive and steady progress. Households can benefit from consumer
credit since it facilitates the acquisition of goods and services and the scheduling of payments over
time. But its overall expansion has been linked to periodic increases and decreases in consumer

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spending. It encourages household spending while interest rates are low and money is plentiful,
but it curbs spending when rates rise, and people begin to repay debt.

3.0 RETIREMENT PLANNING

Planning for retirement entails making preparations now for the life you will lead in the future so
that you can continue to pursue all of your objectives and ambitions on your own. This includes
determining what you want your retirement to look like, calculating how much money you will
need for it, and investing so that your savings can increase over time.

Every retirement plan is unique. After all, you probably have quite definite plans for how you want
to spend your time once you've reached retirement age. Because of this, it is essential to have a
strategy that was developed especially to cater to the requirements of your unique situation.

Your retirement should be a time of leisure after years of employment. Or at least, a period of time
during which you shouldn't need to remain working to pay your living expenses.

Many Malaysians, however, do not feel this way. According to statistics, less than RM50,000 is
saved for retirement by two out of every three Employees Provident Fund (EPF) members who
are 54 years old. They run the risk of living in poverty because of this.

Whether you've been in the job for a short while or for many years, it's crucial to make retirement
plans. Planning beforehand might improve your chances of enjoying a good retirement. How?

3.1 IMPORTANCE OF RETIREMENT PLANNING

I. You have no idea how little wisdom you have.
-You are likely very knowledgeable in many aspects. You can't predict the thousands of variables
that may affect your retirement finances, but you can start planning now. I hope this is your one
and only retirement. However, this also means that you are not yet sufficiently experienced to
understand the most important questions and answers that can lead to a prosperous retirement.

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A well-thought-out retirement strategy can provide answers to important issues like these:
-What do I need to know about taxes, savings, and investments to make informed decisions?
-If I want to save more money, what types of accounts should I look into?
-Can I get a spouse's social security benefits?
-Can I benefit from converting to a Roth IRA?
-I'm worried about the economy and want to know what I should do in a slump.
-Asking, "Should I rollover my inactive 401(k)?"
-What fiscal matters must I address before the year's end?
-When should I begin collecting my social security?
-Should I proceed with purchasing life insurance?

II. Improved well-being as a result of less stress

Worries about money are a big source of tension. Over 70% of adults worry about money, and this
can have a negative impact on your health, according to the American Psychiatric Association.
Diabetes, heart disease, migraine headaches, and insufficient sleep are just some of the illnesses
that have been related to financial stress. In addition, stress and despair brought on by financial
concerns can leave you unable to take pleasure in the present moment. Your physical and mental
well-being will benefit from the proactive efforts you take today to improve your retirement
planning.

III. Making better professional and financial choices requires a broad perspective.
With age comes a wealth of significant queries posed by life. The majority of the time, there are
no simple yes or no responses.
➔ Should you continue working for the company you're currently at, or try your hand at
entrepreneurship?
➔ Is it a good idea to switch majors or careers later on in life?
➔ The question is whether you should pay for your child's education expenses out of pocket
or find another way to pay for it.
➔ Do you think you'd be able to afford a beach house?

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These judgements can't be made (or at least shouldn't be taken) without considering the monetary
repercussions. Having a firm grasp of your retirement savings allows you to confidently tackle
large tasks. One of the most significant benefits of retirement planning is the improved quality of
one's personal financial and lifestyle choices.

IV. The fear of being forced to retire early will lessen.

It's nice to retire at 55 if it's in the budget, but it's not so great to lose your work and have to find
something else to do. Sadly, nearly half of today's pensioners aren't in retirement because they
want to be. The vast majority of them had to leave their employment due to layoffs or other
compulsions, while a smaller percentage had to do so to care for sick or elderly family members.

Your financial situation will be much more stable if you have already started saving for retirement
in the event that you have to leave your job before you reach retirement age. Even if you haven't
saved up enough for a comfortable retirement, having some money stashed away allows you
greater flexibility and time to make changes to your plans if you need to retire early.

V. Having children won't make you feel like a burden.

What's this about a generation called "sandwiches?"
That's what we call the people who are shouldering the financial responsibilities of raising a family
while also working to make ends meet for themselves.

Approximately 44% of middle-aged individuals with dependent children have at least one living
parent who may require care, and 15% are full-fledged members of the sandwich generation,
providing financial assistance to their own parents as well as their own children. Healthcare and
anticipated long-term care expenses should be included in any comprehensive retirement plan. If
your financial needs are met, you won't have to bother your loved ones to make up the difference.

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3.2 CURRENT ISSUE IN MALAYSIA RELATED RETIREMENT PLANNING

I. Malaysians are aging at an unprecedented rate.

The rapid rate at which the population of Malaysia is aging has increased the significance of
retirement savings planning. The term "population aging" refers to a decline in the proportion of
children in a given population. The increased life expectancy and lower birth rate are likely the
causes of this. Reduced birth rates are the primary demographic factor contributing to premature
population aging.

II. There are a lot of people in Malaysia who can't afford to retire.
Government, industry, and academia use the Melbourne Mercer Worldwide Pension Index to
discuss global pension systems. The 2016 Melbourne Mercer Global Pension Index gave the
Malaysia Retirement & Pension Index a C (55.7%), placing it last out of A (top), B (middle), C
(bottom), and D (bottom) (worst). The Index categorizes each country's retirement income system's
40 variables into adequacy, sustainability, and integrity. This income arrangement has pros and
cons. If not improved, it may lose efficacy and longevity. Based on this, many Malaysians lack
retirement funds, and future initiatives must address this issue.

III. Low EPF member salaries reduce savings, which has an impact on retirement prospects.
The Employee Provident Fund Malaysia (2016) and the Central Bank of Malaysia (2013) found
that 88% of EPF contributors earn less than RM5,000 per month. Malaysia has a lower labour
income-to-GDPI ratio (33% vs. 44% in Singapore, 54% in South Korea, and 57% in Australia).
Labor income should be 50% of GDPI. The study indicated that the majority of EPF members
earning less than RM5,000 per month have savings estimated at RM480,000. EPF members must
cut their standard of living in half to stay comfortable with a monthly retirement income of
RM2,666 (inflation not considered). The Eleventh Malaysia Plan 2016-2020 (Economics Planning
Unit, 2015) reported 2.7 million B40 households in 2014 with a mean monthly income of
RM2,537. B40 earners are the poorest 40% of the nation. Low earnings reduce retirement savings
and financial security. Despite rising spending, many Malaysian seniors have struggled financially
due to income stagnation. Figure 3 shows that retirees in Malaysia had modest labour income
increase but high spending growth between 2004 and 2014. The rising cost of living, the desire to

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aid adult children or grandchildren financially, the unpredictability of economic forces, the rising
cost of health care, the rising average longevity, and the retention of funds for lifelong presents all
drive spending. Due to these factors, retirement savings will increase.

IV. The ratio of household debts to expendable income in Malaysia is the highest in the world
During Dec 2021, Malaysian household
debt was 89.1% of Nominal GDP, down
from 93.1% in 2020. Since 2002,
Malaysia has tracked household debt to
GDP. The numbers ranged from 93.1% in
2020 to 60.4% in 2008. CEIC calculates
Annual Household Debt as a Percentage
of Nominal GDP using annual nominal
GDP and household debt. Bank Negara
Malaysia provides ringgit family debt. The Department of Statistics provides Nominal GDP in
Current Local Currencies, SNA 2008 Base Year 2015. Nominal GDP was computed using SNA
2008 before 2015, SNA 1993 before 2010, and SNA 2000 before 2005.

V. Retirement Planning in Malaysia: An Incongruent Framework

A further worrying fact is that 62% of the
working population in Malaysia has no pension
or other savings in place for when they retire. Out
of the overall working-age population of 22
million (16-60 year olds), 1.5% are government
workers, 31% are private-sector employees (EPF
active members), and 62% are either self-
employed or not in the formal labour force (not
working). The 22 million people who make up
Malaysia's labour force each have their own problems. When they retire, the first group—
consisting of 7% of governmental servants—will get inadequate monthly pensions from the
government. Their average monthly pension of RM2,100 is woefully inadequate to pay the cost of

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living in the modern world, leaving them financially vulnerable in retirement. The second group,
making up 31%, consists of private sector workers who are required to make contributions to EPF
and who can start withdrawing their EPF balances once they turn 55. According to EPF data, just
33% of active members attain Basic Savings, indicating that the majority of EPF members are
unprepared for retirement (saving that is enough to support their living after retirement). Self-
employed people and the jobless make up the rest of Malaysia's workforce (62%). To fund their
retirement, many Malaysians must rely solely on their own resources or make voluntary
contributions to their retirement funds. In a nutshell, 62% of working-age persons in Malaysia
have no access to a retirement social protection scheme.

3.3 STATISTICAL INFORMATION BETWEEN MALAYSIA AND OTHER

COUNTRIES

a) Malaysia

Saving for retirement is very important. This is

because these savings will help retirees to support
their lives. Without a job and source of income,
every employee should be aware of their
retirement planning. The data above is data in
Malaysia about savings made by Malaysians in
preparation for retirement. Based on the statistical
data above, awareness of retirement planning is
still at a low level. However, the percentage
increased from 33% (2014) to 40% (2017). Despite
the upward trend, it is still not enough for retirement use. The average Malaysian is only able to
save not more than RM 150,000 and the figure is small and considered insufficient by
economists.

Only 36% of Malaysian adults, according to the Standard and Poor Report (2016), are financially
literate. Due to this, Malaysia was placed 66th out of the 150 nations included in the research.
People are not well-equipped to make judgments relating to financial management if they do not

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comprehend fundamental financial principles (Tai & Sapuan, `2018). Planning and saving for
retirement are tasks that people with excellent financial abilities perform better.

As mentioned before, there are a number of reasons why Malaysian are unable to save more for
their retirement. Apart from not having enough knowledge, other reasons would be household debt
and current lifestyle (Zulfaka & Kassim, 2021). Some tend to enjoy their life as much as they can;
mentality. Because of all the reasons stated, they overlook the importance of having retirement
planning. Some are not realized that the quality of retirement is very important, especially for
medical costs. As a retiree at least 55 years old, people are expected to not have good health.
Hence, good planning for retirement is very important.

b) Singapore

In Singapore, most elderly people

already have sufficient retirement
savings. The figure above shows the
statistics of the elderly population in
Singapore along with the amount of
existing savings. Year after year, the
amount of savings for retirement is
increasing. By 2030, savings by the
elderly are estimated to reach 900,000
SGD (Admin, 2019). This shows that there is a high level of awareness among Singaporeans. But,
changes in the socioeconomic structure have changed the lifestyle of today's society.

Although Singaporeans are becoming wiser in financial planning; retirement planning, According
to research, 8 out of 10 people underestimate the amount needed for their golden years by 31%.
This is despite the fact that 40% of Singaporeans have chosen a more conservative retirement
lifestyle requiring an estimated S$2,300 monthly, up from 36% last year (Choy, 2021). In 2022,
approximately 66% of Singaporeans have made retirement plans, up from 63% in 2020, with the
greatest growth among those in their 20s and 30s. However, less than half of those who have plans
are on track to meet their objectives. But, compared with Malaysia, Singapore was seen to be more
looking ahead and wise in financial planning, especially retirement planning.

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4.0 CONCLUSION

To summarise, the increasing number of consumer credit in Malaysia shows that people are
increasingly interested in using credit. Previously, credit was commonly used to purchase
liabilities and assets such as cars and houses. However, following the COVID-19 pandemic, the
trend of paying for a service in monthly instalments has increased. As a result, an increasing
number of businesses are offering payment plans for services. Various payment methods, such as
ShopeePay Later, GrabPay Later, ATOME, credit card instalment, and so on, have been
introduced.

This instalment purchase allows the buyer to obtain a service without having to take out a bank
loan. Additionally, the low interest rate encourages consumers to use credit more flexibly.

Planning for retirement is crucial to guarantee the community of Malaysians' well-being in old
age. Malaysians still don't seem to be particularly aware of the need to plan for retirement. The
fact that the vast majority of Malaysians only have savings for retirement less than RM 150.000 is
evidence of this.

The Pension Scheme and the EPF Scheme are the two primary retirement savings plans in
Malaysia. The Pension Scheme is only available to civil servants, whereas the EPF Scheme is
available to both public and private sector employees. For the purpose of funding their pension
plans, both programmes deduct a predetermined percentage of employees' wages.

Following the COVID-19 pandemic, the proportion of people who do not have pension savings
has increased. This is due to the fact that they withdrew almost RM 20,000 from their EPF savings
in order to pay off debts, operate their business, and survive.

People in Malaysia are less interested in making pension savings plans due to the low salary
scheme issue. This is due to the fact that they need to survive and pay off their existing debt with
their current salary.

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5.0 RECOMMENDATIONS

The following are some suggestions for consumer credit and retirement planning.

a) Consumer Credit and Retirement Planning Exposure

Early consumer credit education and retirement planning should be made available to the
community, especially to students who will soon start working. This early exposure is critical in
assisting the community in budgeting and saving. Due to a lack of exposure to expenses and
savings, the majority of people struggle to manage their finances. As a result, most people
overspend and save less. This includes credit-related expenses. Most people overspend on credit
beyond their ability to pay.

b) Raise Average Household Income

Increased income is required to strengthen credit spending and increase pension savings. The
public should not feel burdened by their income, so the government must implement a plan to
solve this issue. As average household income rises, the price of goods will become more stable
and lower, causing people to incur less debt and save more.

c) Promote Additional Retirement Planning Initiatives

Paying off debts, keeping track of daily expenses and limiting the amount spent, eliminating
unnecessary expenses like accessories, and other initiatives can be introduced and carefully
exposed for planning pension savings. Other initiatives that can be introduced is invest in a variety
of things as well, including stocks, bonds, and other financial instruments.

d) Exposure On the Proper Use of Credit

Despite the fact that more Malaysians are using credit, particularly credit cards, there are still many
people who make poor spending decisions that lead to heavy debt loads. Early disclosure from the
government is required regarding credit card use, including the benefits and drawbacks, as well as
how to manage expenses and make payments.

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REFERENCES

Admin. (2019, November 11). Retirement In Singapore. Retrieved from PORTFOLIO:

https://www.portfoliomagsg.com/article/retirement-in-singapore.html

Choy, N. (2021, November 2). Some 8 in 10 Singaporeans still underestimate retirement

amount by 31%: OCBC. Retrieved from BusinessTimes:
https://www.businesstimes.com.sg/companies-markets/banking-finance/some-8-
10-singaporeans-still-underestimate-retirement-amount-31

Tai, T. L., & Sapuan, N. M. (`2018). RETIREMENT PLANNING IN MALAYSIA:

ISSUES AND CHALLENGES TO ACHIEVE SUSTAINABLE LIFESTYLE. The
Turkish Online Journal of Design, Art and Communication, 1222-1229.

Zulfaka, A., & Kassim, S. (2021). Retirement Awareness Among The Working Population
Below 40 In Malaysia. . Journal of Islamic Finance, Special Issue, 101-110.

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