Dr Juita Mohamad
KUCHING (March 19): The Employees Provident Fund (EPF) members who are going for another withdrawal of up to RM10,000 from their savings, could risk seeing insufficient savings upon retirement, warned the Institute for Democracy and Economic Affairs (Ideas).
In its statement yesterday, the institute said this would become an increasingly pertinent issue as Malaysia began its transition into an ‘aged society’ over the next two decades.
“Ideas believes that EPF withdrawals should be a policy of last resort, used only in emergency situations.
“Instead, existing funds such as the National Disaster Relief Fund (TBBN), the National Disaster Relief Trust Fund (KWABBN) and ‘zakat’ (tithe) should have been utilised,” it pointed out.
The institute noted that to date, the government had allowed EPF savers to withdraw up to RM71,000 from their retirement funds through three previous EPF withdrawal programmes, amounting to a grand total of RM101 billion.
As highlighted by EPF, this led to a total of 6.1 million members now having less than RM10,000 in savings in their retirement funds.
The EPF further emphasised that as at October last year, 3.6 million contributors had less than RM1,000 in their accounts and from this group, two million Bumiputera members had less than RM1,000 as savings.
Ideas Economics and Business Unit director Dr Juita Mohamad acknowledged the government’s intention of allowing EPF withdrawals as a way to provide immediate relief to low-income Malaysians who were still struggling in the aftermath of the Covid-19 pandemic as well as the recent flooding, but she also pointed out the specific objective of the EPF being set up – to provide a social safety net for retirees in Malaysia.
“The (EPF) withdrawal and its timeline need to mirror that objective – for retirement purposes, and for those purposes alone.
“Ideas believes that the decision to continue allowing unending EPF withdrawals to be made is not grounded on sound economic logic; rather, it is a ‘knee-jerk’ reaction, responding to political agenda.
“Such short-term thinking would have a detrimental impact over the long run, and we urge political leaders to consider the negative impact that such a policy entails for our pensioners and future generations.
“Bear in mind, in order to allow people to withdraw their savings, EPF would be forced to sell more of its overseas assets at a time of volatile market conditions due to the ongoing war in Ukraine, inflationary pressures on global energy and commodity prices, as well as expectations of central banks raising interest rates sometime this year,” said Juita, adding that should the EPF be forced to adjust local equity holdings, this could impact Bursa Malaysia badly, further hitting EPF accounts.
According to data from the World Bank, Malaysia was already an ageing society in 2020, with approximately seven per cent of the population were aged 65 and above.
“Based on latest projections, Malaysia would become an ‘aged society’ by 2044, with over 14 per cent of its population above the age of 65.
“It is crucial that our increasingly large population of pensioners would each have an adequate cushion when they hit retirement.
“With the economy recovering and the job market strengthening with the absence of lockdowns, Ideas believes that EPF withdrawals should be used as the last resort – only in emergency situations.”
Adding on, Juita said there were various existing funds at both the federal and state levels that could be pooled and tapped into helping the vulnerable households.
These funds would include the TBBN, funded by donations from various parties and was set up to manage said disaster relief donations; as well as the KWABBN, which was set up in 2016 under the Financial Procedure Act 1957 with the objectives of giving aid to disaster victims, paying for disaster management activities or costs, and providing aid to state governments, departments or agencies.
At state level, the proceeds from zakat must also be distributed further as ‘a powerful poverty alleviation and wealth redistribution tool’, said Juita.
“Such a tool can be deployed more effectively at the micro-level, targetting the vulnerable households in a post-pandemic setting, as it can serve to top up existing federal funds.
“In the long term, the Malaysian government should focus on creating more formalised social safety nets that would cover both formal and informal workers,” she added.