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Across the emerging world, policymakers are grappling with how to build retirement systems that meet the needs of their rapidly developing and rapidly aging societies. Nowhere is the challenge more urgent than in Asia, which is both developing and aging more rapidly than anywhere else on earth. Provident funds, which are fully funded, government-managed, defined contribution systems, have long been the dominant form of retirement provision in much of Asia. The purpose of this report is to assess the strengths and weaknesses of the provident fund model, evaluate the performance of three of Asia's four largest provident funds, and identify steps that they and other provident funds can take to improve retirement security. The funds covered in the report are India's Employees' Provident Fund (EPF), Indonesia's Jaminan Hari Tua (JHT), and Malaysia's Employees Provident Fund (EPF). The report identifies two key features of the provident fund model that may make it an attractive choice for both governments and workers in emerging markets.

The Malaysian Employees' Provident Fund (EPF) was created as a mandatory national saving plan in 1951 and has grown consistently. Following two decades of state‐led economic development, substantially funded through EPF contributions, the Malaysian Government is now ostensibly seeking to reduce state intervention in the economy in order to encourage liberalization and thereby engender further economic growth. Tracing the parallel evolution of the EPF and the growth of the Malaysian economy, highlights both the direct role of the EPF in providing soft‐loan capital for state‐sponsored development projects and the indirect role of the fund in underpinning politically effective, but not concomitantly economically efficient, strategies for ethnically rebalancing the economy. Accordingly, in direct contradiction to recent World Bank analyses, concludes that the continuing Malaysian commitment to a publicly managed national provident fund (NPF) is based on both efficiency criteria (in relation to the EPF itself) and effectiveness criteria (in relation to state‐determined investment strategies). Although the success of Malaysian economic development policies inevitably involves a restructuring of the operations and management of the EPF itself, the continuity in the Malaysian commitment to its NPF complements and underpins similar continuities in the active role of the Malaysian state, even in an era of privatization.

Rising elderly life expectancies imply the need to accumulate sufficient savings for retirement. This paper investigates the role of recent changes in the investment menu of the Singaporean Central Provident Fund (CPF) system. Our research explores the investment patterns of CPF participants and articulates their implications for policymakers. We find that most investors use their money for housing purchase and default the remainder to the CPF investment pool. The bulk of non-housing saving sits in bank accounts paying a low return. A fraction of workers does elect outside investment products, with high-income earners and males taking more risk than low-income earners and females. Since workers who default their money to the CPF fund receive a guaranteed 2.5% return on the Ordinary Account and 4% on the Special Account, hurdle rates for money market and equity funds are substantial. These high hurdle rates help explain why few CPF account holders invest outside the default government investment pool, though inertia probably explains why many employees let their funds sit in bank accounts earning low interest rates. More attention could be devoted to lowering fund expenses and commissions, including the myriad of fees, expenses, loads, and wrap charges; it might also be beneficial to streamline and rationalize the investment menu offered to participants. [PUBLICATION ABSTRACT]

This paper documents the best practices and practical lessons learned from Malaysia's largest mandatory public provident fund, the Employees Provident Fund (EPF). The objective of this paper is to increase the knowledge base of efficient pension funds for developing countries, drawing from Malaysia's experiences. Findings include key critical factors that contributed to the successof the EPF, from a small pension fund set up in 1949, to become one of the largest pension fund among developing countries and the 15th largest in the world. This paper summarizes the EPF's key strategies in corporate governance, investment, and operational strategies, as well as policies deployed by the EPF in managing its assets. The lessons from the EPF come from three main factors. Firstly, the EPF has developed a strong governance structure which discourages external politicalmeddling and encourages transparency and accountability. Secondly, the EPF's investments strategy, guided by its Strategic Asset Allocation, including diversifying to foreign markets and new asset classes, has enabled the Fund to produce enhanced returns. Thirdly, the EPF's operational effectiveness which is driven by the professionalism of their employees and their continuous improvement for members' benefit. Nonetheless, several challenges remain in the present and in the future. The first challenge involves demographic changes as Malaysia is ageing more rapidlythan other countries and even now a sizable number of workers do not have the recommended minimum savings level needed for retirement. A revamp of the current model is needed to ensure that members will be financially independent post-retirement. The second challenge is lack of coverage: only half of those in the labour force are contributing to the EPF, which leaves the other half without oldage pension coverage. A reform agenda needs to expand coverage particularly for the self-employed. The final challenges are maintaining public trust and staying relevant, especially in the age of the fourth industrial revolution and the emerging gig economy that has different needs and demands. This case study will hopefully be of benefit to both policy makers andpractitioners, particularly in the developing world. It could help play an important part in designing a successful provident fund to contribute to a comprehensive social safety net for citizens.

AbstractProvident funds have been introduced in twenty third world countries as a way of meeting a need for social security. This article provides a careful comparative review of these funds, describing who they cover, how contribution rates are specified and on whom they fall, the rights the funds confer and how the funds are managed. The article points out that the provident funds have proved to be important financial institutions, valued by governments as instruments for mobilizing savings, but none has found a way of achieving the goal of providing adequate social security protection on the basis simply of compulsory savings.