Monday, November 23, 2020

Pandemic will end but so will EPF savings

Some 15 million EPF depositors may face the spectre of insufficient retirement funds if withdrawals from Account 1 are allowed.

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As a kid, my mother always advised me against making decisions when I am angry. Decisions made in an emotion-driven state of mind often bring about awful results, be it starting wars or a pointless quarrel with a loved one.

This is why we must exercise restraint and caution over the calls to allow EPF depositors to withdraw savings from their Account 1. While I can understand where the depositors are coming from, their requests are often driven by knee-jerk reactions.

First of all, I understand that many EPF depositors are going through tough times due to the Covid-19 pandemic, especially the B40 and M40 groups. Many have lost jobs, had their salaries slashed or face the prospect of either, with the pandemic showing no signs of abating until a vaccine is found.

There is a sense of desperation and despair among those who find it difficult to make ends meet, as the moratorium on bank loans came to an end while savings in banks are fast depleting, if they have not already.

There is also anger all around – anger at the state of the economy, anger at being holed up at home, anger that Covid-19 cases are shooting up just as we were making headway, just to cite a few examples. And when anger mounts, we tend to throw caution to the wind.

In the throes of desperation, many see their EFP savings as their only lifeline to tide them over during these trying times. “It’s my money anyway and it’s better for me to survive the present than to worry about my future” is a common line of thought.

This is a flawed argument that goes against the grain of financial prudence and discipline, no matter what the circumstances are. EPF savings are for depositors’ old age.

Even before the pandemic, experts had already projected that most Malaysians would not have enough savings in their EPF accounts to get through their golden years. Removing this financial safety net reeks of economic recklessness and is nothing more than a populist move to score brownie points.

The pandemic will be over eventually and as “normalcy” returns, the 15 million-odd EPF depositors may face the spectre of insufficient retirement funds, if Account 1 withdrawals are allowed.

With an ageing population, a healthcare crisis cannot be ruled out if current depositors do not have enough savings post-retirement. Public hospitals could be overrun and the labour market in disarray as the elderly cling on to jobs, knowing that their retirement savings will dry up soon.

More than ever, there has to be financial discipline. Just as a general at war needs to be level-headed to map out battle strategies and not get distracted by exploding mortars or groans of men dying in combat, our policymakers need to be steadfast and rational in mapping out the road ahead, post-Covid-19.

The last thing we want is to pander to emotionally-charged sentiments that are not grounded on sound socio-economic principles. At the end of the day, the pandemic will end. And there is no point in winning the Covid-19 battle but losing the war through the reckless decision to allow EPF Account 1 withdrawals.

The views expressed in this article are those of the author(s) and do not necessarily reflect the position of MalaysiaNow.

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