Setting the course for KWAP
PENSION reform is becoming increasingly unavoidable as longer life expectancy and rising fiscal pressures impact the system.
“The current pension system needs to be looked at for the long-term health of the country as Malaysia moves toward an aged nation status.
“Life expectancy is now 76 years, which increases the payout period for pensions,” says Datuk Nik Amlizan Mohamed, the soon-to-retire chief executive officer (CEO) of Kumpulan Wang Persaraan (Diperbadankan) (KWAP).
Nik Amlizan will retire this month after overseeing the fund’s growth to RM200bil in 2024, including the withdrawals that KWAP provided to the government.
In 2026, spending on emoluments for civil servant salaries and allowances is budgeted at RM109.37bil, while retirement charges are projected to rise to RM42.8bil.
The 58-year-old from Kelantan, was among the pioneering staff when KWAP was set up in 2007 with RM41.94 bil in assets.
She left KWAP in 2018 to lead Lembaga Tabung Angkatan Tentera (LTAT), returning two years later as CEO.
As the government’s official agent for civil servant pensions, KWAP manages retirement savings primarily through investment returns, supplemented by government contributions. Its mandate is to ensure pensions are paid while keeping the fund sustainable for the long term.
Apart from this, the country’s retirement system includes contributory models such as the Employees Provident Fund (EPF) and LTAT, funded by mandatory contributions from employees (or military personnel for LTAT) and supported by employers, with the government acting as employer for LTAT.
Coming back to KWAP, the government withdraws funds from its portfolio when necessary to cover pension payments.
In 2024, it withdrew RM5bil from KWAP and in 2025 the fund had a withdrawal of RM4bil (in line with what was announced in the 2025 budget), bringing total support to RM29.5bil to date.
Nik Amlizan, speaking to StarBiz 7 at KWAP’s headquarters in Integra Tower, The Intermark – a prime office building the fund owns in Kuala Lumpur, notes that pension reform is a complex challenge.
“If you look globally, there is not one system that is a cookie-cutter model for every nation. It varies from the perspective of fiscal capacity, demographics and social expectations.
“Some countries have taken decades, and they are still evolving. The United Kingdom, for example, has outlined plans to gradually raise its retirement age to 67 by 2028 and 68 by 2046. Closer to home, Singapore is incrementally increasing its retirement age to 65 by 2030.”
As for Malaysia, she says pension discussions, once rarely held openly, are now gaining traction at higher levels, with more coordinated engagement across multiple stakeholders – a development she calls “significant”.
“However, reforms take time and must be carefully sequenced. Poorly timed changes, such as France’s abrupt pension reform, have triggered public backlash, and the country has since deferred its reform until 2028.”
Drawing on the World Bank’s multi-pillar framework, she notes that Malaysia’s retirement system is heavily reliant on mandatory defined contributory schemes such as the EPF and LTAT.
While voluntary savings and informal support structures exist, she says more needs to be done to ensure the system meets the needs of a rapidly ageing population.
“The way forward involves strengthening coverage, adequacy, and sustainability.
“Coverage ensures as many citizens as possible are included such as gig and informal economy workers; adequacy guarantees sufficient retirement savings; and sustainability secures the long-term viability of the funds.”
KWAP, she says, has been involved in ongoing discussions, centred on a multi-pronged approach to address gaps in the system.
This includes tackling sustainability concerns by gradually transitioning from the current defined benefit (DB) scheme, where pensions are government-funded, to a defined contribution (DC) model.
Efforts are also being explored to introduce a more comprehensive national pension framework, aimed at expanding coverage to informal and gig economy workers while improving adequacy through a basic contributory pension tier.
However, Nik Amlizan reiterates that any change must be “introduced gradually and thoughtfully to hit the sweet spot – effective and acceptable to all parties involved”.
Diversifying KWAP’s portfolio
Beyond supporting payouts, KWAP’s long-term sustainability relies on effective fund management.
Initially concentrated in public markets, the fund has expanded into fixed income with a more active approach, and later into private markets, an asset class that can carry higher risk but also offers potential for greater long-term returns.
“Internal rate of returns (IRR) are still in the double digits for private market investments,” Nik Amlizan says, citing the fund’s investments in homegrown biscuit maker Munchy Group and logistics player Swift Haulage Bhd.
However, not every investment has gone according to plan. One notable case was eFishery in Indonesia, where financial irregularities affected KWAP alongside other major investors.
Nik Amlizan explains that at the time of investment, eFishery had a strong 10-year track record and credible international high-profile backers, and KWAP had conducted robust due diligence.
“Unfortunately, the outcome was not what we expected. I am very disappointed with that.”
Legal action is ongoing, with the goal of recovering as much as possible. The experience has shaped KWAP’s approach to private markets.
“Incidents like eFishery are a key reason why we no longer make direct investments. Instead, we channel funds through partnerships and managed structures, allowing us to pursue growth opportunities while better managing risk with an added layer of oversight.”
Backing growth-stage businesses
In line with this shift, Nik Amlizan says KWAP is relooking its approach under the Dana Perintis programme. Of the first RM500mil announced, the original plan split allocations evenly between direct investments and fund-based investments.
However, all capital will now be deployed through funds or co-investments alongside the fund.
Similarly, the RM6bil allocation under the recently launched Dana Pemacu will be deployed through separately managed accounts across 12 co-general partner (GP) structures, including international firms such as Navis Capital Partners and Savills Investment Management.
Dana Pemacu targets private markets such as private equity, infrastructure, and real estate.
“The fund is being rolled out progressively at about RM1.2bil a year, with roughly RM500mil invested to date, and at least 40% earmarked for domestic investments. After three to four years, some GPs are expected to start generating returns, illustrating the J-Curve effect in private equity,” Nik Amlizan explains.
It is not just about deploying capital; KWAP’s strategy also focuses on building Malaysia’s private market talent pool.
“We want the 12 GPs to be on the ground locally. Through the co-GP model with these international partners, we aim to develop 24 new talents who will be supported by firms with long track records and deep sector expertise to help generate returns.
“Even though these investments are illiquid, they can grow over time, and the lifespan of the portfolio fits within that 30-year horizon, effectively allowing for two investment cycles of our different funds.”
Pointing to another success story, she says KWAP had exited an education entity at the end of 2025 that delivered more than two times capital invested.
Both Dana Pemacu and Dana Perintis are designed to scale up existing companies, helping them grow into stronger, more sustainable players that can support the broader economy and create jobs. Capital from these funds has, for example, supported the expansion of Bateriku and Zus Coffee, driving growth domestically and abroad, she points out.
With most of KWAP’s portfolio still in liquid equities, Nik Amlizan says the private market slice is manageable.
“Pensioners may retire in 30 years’ time, so we can allocate capital to opportunities that don’t require short-term liquidity.”
Exploring new growth areas
KWAP last year announced its pilot project for an affordable retirement-oriented development in Kepala Batas, Penang, with plans to explore similar projects in other states. This is a collaboration with the Majlis Agama Islam Negeri Pulau Pinang and KWEST Sdn Bhd, KWAP’s property development arm.
The retirement community will be built on 4.05 ha of Baitulmal land owned by the former and will feature a mix of apartments and single-storey homes.
“Construction will take 24 to 36 months. We hope to see strong demand,” Nik Amlizan says. The project will be rental-based.
“Residents will pay around RM1,100 per month for accommodation, meals, classes, and other services, leaving them with a portion of their pension for other expenses.”
The fund is also exploring purpose-built student accommodation, having backed several successful developments in the United Kingdom.
“Australia has also done it, although our exposure there is mainly in industrial real estate. We do not have such a vehicle in Malaysia and it is an exciting investment opportunity.”
In October 2025, Dana Iklim+, was officially launched as the first climate focused investment fund in Malaysia with a target deployment of RM2bil.
Nik Amlizan says this initiative serves as the third catalytic investment programme for the organisation, building on the foundations established by Dana Pemacu and Dana Perintis to strengthen the domestic investment ecosystem.
Success will be measured through a dedicated impact framework covering six dimensions, including national alignment and climate resilience.
On the plus symbol in the fund’s name, she says it represents co-benefit indicators that address interconnected development goals such as food security, clean water, and energy access.
“Every investment proposal at KWAP undergoes a robust deliberation process that includes an independent risk management perspective and environmental, social, and governance review.”
Building for the long term
In 2024, KWAP achieved a record-breaking investment income of RM18bil, translating into a total return of 12% (up from 8% in 2023), driven largely by a strong performance in public equities.
“It was an exceptional year, with everything working in our favour,” Nik Amlizan says, noting that the fund has consistently targeted a long-term average return of 7% per year.
Unlike many funds that report only gains or losses when assets are sold, KWAP values its entire portfolio every year, including private investments.
This “mark-to-market” approach provides KWAP with an accurate and transparent picture of how the fund is really performing, showing both unrealised gains and losses alongside realised returns.
With the FBM KLCI posting only modest gains in 2025, she says expectations that it will be a repeat of 2024 need to be tempered.
Looking ahead to 2026, she says strategic asset allocation reviews and stress-testing will guide investment decisions, particularly amid ongoing geopolitical tensions in the Middle East.
“But we are a long-term fund. We focus on structural changes in our portfolio rather than short-term noise. The recent conflict is a ‘black swan’ event with global ripple effects, but when the market dips, we see it as an opportunity,” she says.
The bulk of KWAP’s investments remains domestic, with overseas allocation typically ranging around 25%, although current exposure is slightly below that level.
According to Nik Amlizan, KWAP’s portfolio is built with flexibility.
“While we hold core positions aligned with benchmarks, there is no sentiment. We are prepared to exit positions entirely if they no longer meet our value or forward-looking expectations.”
Transforming the organisation
Since returning to KWAP in late 2020, Nik Amlizan has steered the fund toward a more “catalytic role” in its investments.
The first two years focused on strengthening the organisation and implementing TERAS 5, a strategic initiative aimed at preparing the fund for the future.
Through TERAS 5, KWAP brought in key leadership roles, including a chief financial officer (CFO) – as there was no CFO in KWAP prior to that – and also a chief digital officer, chief retirement services officer, chief strategy and services officer.
The team was expanded to around 800 staff, and engagement with pensioners was enhanced through the flagship MyPesara digital app, which has since recorded over 307,000 downloads.
One of the initiatives Nik Amlizan is particularly proud of is Karnival MyPesara, an outreach event designed to give back to pensioners. Last year’s edition in Kota Bharu drew over 31,000 participants and marked the launch of KIAH, a bilingual AI chatbot that helps pensioners navigate benefits and retirement programmes.
Meanwhile, the fund’s newly launched Jana MyPesara programme helps retirees stay economically active through entrepreneurship.
With an allocation of RM20mil and run in partnership with Amanah Ikhtiar Malaysia (AIM), the programme aims to support around 3,000 pensioners, promoting inclusive growth and raising the floor for retirees.
“The programme offers microfinancing ranging from RM1,000 to RM30,000 for retirees with a monthly household income below RM5,880.
While the scheme primarily targets women borrowers, male pensioners may participate by nominating a female family member under the Sahabat system,” she says, adding that the initiative was developed after a survey showed that nearly 60% of 810,000 pension recipients are interested in entrepreneurship.
“Many pensioners wanted to start home-based businesses but lacked financing.
“Under the programme, pensioners can borrow through AIM a trust body under the Trust Act 1952, with KWAP providing the capital.
Nik Amlizan explains that KWAP’s initiatives for pensioners’ well-being are grounded in its Purpose Beyond Returns approach, symbolised by an “infinity loop”, where strong investment returns support social impact.
Looking back on her tenure, Nik Amlizan says the KWAP she joined and the KWAP she leaves are very different, and the fund is in a much stronger position.
But even as the fund grew, operational expenses have stayed low at just 0.2% – a level the fund has maintained consistently.
“Our fund size has grown from RM41bil at inception to around RM200bil today.
“There are things that we have put in place and, whenever things do not go our way, we treat them as lessons and as things that we need to do better in the future,’ she reflects.
“The risk, investment and operational teams are strong. Even the pensioners are a lot happier – we can see it when we speak to them on the ground.”
Nik Amlizan says she will depart with a heavy heart and will surely miss the excitement of the markets while looking forward to seeing progress in pension reform.