Friday, May 20, 2022

Retirement savings are depleting, EPF warns amid calls for more withdrawals

A majority of those who made withdrawals under the various schemes during the Covid-19 crisis are Bumiputera, it says.

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The Employees Provident Fund (EPF) today warned that the country’s social protection has been pushed to the limit after a series of withdrawals due to the Covid-19 crisis, amid calls by Umno politicians for the compulsory retirement savings scheme to allow members to take out more money in the wake of the floods that recently hit several states.

The fund said while it was understandable that withdrawals were allowed during the virus lockdowns, this should not be made a practice during natural calamities as it is bound by laws guiding how members’ contributions are managed.

“The scale and impact of the unprecedented Covid-19 pandemic and the recent natural disasters have pushed the country’s social protection to its limits, and the approach of using EPF savings during emergencies will have a severe impact at a time when members are left with insufficient savings for their retirement, coupled with other uncertainties such as rising healthcare costs,” the EPF said in a statement.

The reminder comes as several politicians, especially from Umno, continue to press the government to allow more withdrawals similar to the lumpsum withdrawal schemes introduced to cushion the impact of several economic lockdowns at the peak of the Covid-19 crisis.

The leading proponent of such calls has been none other than former prime minister Najib Razak.

Yesterday, he launched a scathing attack on Finance Minister Tengku Zafrul Aziz for refusing to open EPF funds under the pretext of floods.

“Don’t listen to the advice of the outdated PN finance minister,” he said, referring to the previous Perikatan Nasional government.

“Listen to the people. A final special withdrawal. After that, focus on rebuilding the savings of EPF contributors with low balance. There are many ways.”

Over the past year, the government had introduced schemes such as i-Lestari, i-Sinar and i-Citra allowing EPF members to withdraw their savings.

But the EPF said the move had led to the outflow of RM101 billion involving 6.1 million members, leaving them with less than RM10,000 in their accounts. Of these, 3.6 million have less than RM1,000.

It also said that a majority of those who made the emergency withdrawals were Bumiputeras.

“As a result, 4.4 million or 54% of Bumiputera members now have less than RM10,000, and two million or 25% have less than RM1,000.

“This is very worrying as it reflects an increase in the percentage of members who cannot reach the EPF Basic Savings quantum of RM240,000, which is the minimum amount required by members upon reaching 55 years of age,” it said.

The EPF meanwhile said it was bound by its fiduciary duties to equally protect members’ interests, saying millions of members who had not made any withdrawals have expectations of good returns from their savings upon retirement.

It spoke of concern that allowing more withdrawals would lead to a trust deficit among members aged between 55 and 60, who could at any time resort to withdrawing a total of RM270 billion in EPF savings.

Adding that Malaysia would become an ageing nation by 2030, the EPF said this would mean a higher burden on the government’s support system.

“This further highlights the importance of having sufficient savings and income for future well-being, while at the same time preventing future financial shocks.”

The EPF said it would continue its social responsibility to help flood victims under the GLIC/GLC Disaster Response Network (GDRN), where the government-linked bodies would be given a matching grant from the government in channelling humanitarian assistance.

The EPF said the use of funds from GDRN would not affect members’ savings, adding that it was also able to make available some RM10 million saved from its operational expenses.

“Assistance will be channelled in the form of material needed by those affected through credible non-profit charities,” it added.

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