Smart tax-linked retirement savings system (star): a dual-channel incentive mechanism for Malaysian civil servants

Retirement savings among Malaysian civil servants remain a key policy concern. Present-biased spending limits voluntary saving, and reliance on future pensions or statutory benefits may weaken retirement adequacy. Tax refunds can support asset accumulation; however, many recipients treat them as disposable income and spend them immediately rather than save for retirement. This study introduces the STaR System, a Smart Tax-Linked Automatic Retirement Savings mechanism that directs tax refunds into retirement assets. After the Inland Revenue Board confirms an eligible refund, the system transfers a default share, for example, 80 percent, into a retirement savings account. It pays the remaining amount in cash to preserve short-term liquidity. Users can adjust the allocation or opt out. The default setting applies behavioural principles to reduce inertia, present bias, and impulsive spending. STaR adopts a dual-channel accumulation model. It combines regular salary contributions with an additional stream from tax refunds. This structure creates a double-saving effect without reducing monthly take-home pay. A simple projection indicates that redirecting RM3,000 annually into retirement savings at a 5 percent return over 20 years can generate nearly RM100,000 in additional assets. The mechanism is feasible because existing Malaysian institutions, including LHDN and the EPF or a dedicated civil servant retirement fund, can support its implementation. STaR benefits individuals, the government, and the broader economy by improving retirement adequacy, reducing future fiscal pressure, and strengthening long-term financial stability. It offers a scalable behavioural fintech approach to sustainable retirement security.