PETALING JAYA: The last time a black swan event hit Malaysian shores, the finances of millions of Malaysians were devastated.
This event was the Covid-19 pandemic in early 2020, and in the aftermath of the enforced lockdowns, Malaysians were permitted to dip into their EPF account to withdraw a massive RM145 billion in total.
The government sanctioned four EPF withdrawals due to the pandemic, and while it helped the people, especially those in the lower income groups, it had serious financial repercussions for those who made the withdrawals.
The EPF, or the government, will not be doing anyone any favours by allowing yet another withdrawal. As it stands, only 4% of the population can afford to retire. This was revealed by EPF chief strategy officer Nurhisham Hussein during a roundtable on the future of pensions and social protection in Malaysia recently.
Then deputy finance minister Shahar Abdullah warned in August that EPF members’ savings were low and at a very worrying level.
However, there are still calls by various parties for further EPF withdrawals. For example, non-governmental organisation Pertubuhan Gagasan Inovasi Rakyat is rallying support to urge the government to allow targeted withdrawals for the second time this year.
Center for Market Education CEO Carmelo Ferlito is disheartened by such calls, saying he is against another round of withdrawal, given that most of the people needing such withdrawals probably do not have much money to withdraw.
He said he did agree with the first EPF withdrawal as a temporary support to help those suffocated by the Covid-19 lockdown policies, but was not in favour of it to be repeated.
In March, the administration of prime minister Ismail Sabri Yaakob allowed for an EPF withdrawal of up to RM10,000. This was the fourth withdrawal after i-Lestari and i-Sinar in 2020, and i-Citra in July 2021.
Rebuilding depleted savings
Sunway University business school professor Yeah Kim Leng said given the retirement fund has been depleted by multiple withdrawals over the last two years, it is ill-advised to continue such a policy.
“As the economy has recovered, the focus of the people and government should be on rebuilding the depleted savings to avoid a looming old age poverty crisis,” Yeah said.
Consumers’ Association of Penang president Mohideen Abdul Kader weighed in to say EPF savings are for the purpose of a person’s needs in their old age when the source of income dries up.
“They should not be utilised for other purposes,” he said.
The Malaysian Institute of Economic Research (MIER) says there is an urgency to recognise current provisions are inadequate as many Malaysians are left with little or no money in their retirement funds.
MIER senior research fellow Geoffrey Williams said although EPF is a central anchor organisation, it alone cannot be the sole solution to the overall pension issue.
“This is an economic, social and governance issue in a broader sense and a developmental issue in its broadest sense,” he said during the roundtable.
Viable solution needed
However, RinggitPlus director Hann Liew has an alternative solution that could meet Malaysians in the middle.
He told FMT Business that since the “EPF genie is out of the bottle”, perhaps it is time for EPF to add Account 3 (3%-5% of the balance) that people can use for emergencies without draining half of their account.
Account 1 is for retirement and should translate into income replacement during old age while Account 2 is for withdrawals that should add to the value of your retirement via housing, education, or medical.
But without neglecting the main issue, Liew said: “Direct help is needed more from the government fiscally rather than people relying on their own retirement funds.”
Carmelo agrees in principle with this solution but only until a comprehensive and proper study is conducted, and reforms can be formulated.
As for Yeah, he opines the idea is good provided all three accounts meet the required savings amount as the present projected income and mandatory savings rate are “inadequate to cover retirement needs”.
Source: https://www.freemalaysiatoday.com/category/highlight/2022/12/27/dipping-into-epf-kitty-should-stop-until-proper-study-is-done/