EPF's i-Sinar a stop-gap measure for unprecendented times - analysts

 

The government needs to make it clear that i-Sinar and other Employees Provident Fund (EPF) programmes are stop-gap measures in light of the current challenging economic situation.

Institute for Democracy and Economic Affairs (Ideas) research manager Lau Zheng Zhou said while people urgently need to meet financial obligations in these challenging times, they should not be encouraged to think of EPF savings as their first option for funds.

Ideas is concerned over the financial security of EPF members as well as those of their families, he said.

“About 70 percent of EPF members aged 55-60 years opt for lump-sum withdrawals upon retirement, and half of the members exhaust their savings within just five years,” he told Bernama.

Lau said although the EPF i-Sinar facility is expected to be fully taken up, thus boosting consumption, the multiplier effect could be limited as this is more like replenishing spending that would have happened in normal times, rather than a massive injection to the economy.

“Also, a portion of these withdrawals could be used to repay debts rather than for consumption per se,” he added.

Having said that, Lau believes replenishing Account 1 would be a good measure once the individuals have recovered their earning ability and resume their EPF contribution.

As such, he said individuals should be given the right incentives to manage personal finances in a responsible manner and to keep a healthy balance between current and future spending needs.

Meanwhile, University Malaya’s Faculty of Economics and Administration senior lecturer Mohammad Tawfik Yaakub said the announcement that i-Sinar's scope will be expanded was not appropriate.

He said this is because the government had just agreed to implement targeted withdrawals earlier.

"I’d advise EPF contributors to plan small investments... instead of using all of the withdrawal to meet emergency needs," he said.

Tawfik added that contributors should plan for their retirement needs and not create new debts which could disrupt their cashflow in the future.

Meanwhile, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said EPF members who are not cash-strapped should not make any withdrawals.

"This is to ensure that they have sufficient savings upon their retirement," he said, adding that the pandemic had forced the government to take unconventional measures as many are still adversely affected.

“In general, the withdrawal will add liquidity to the country’s economy, and this should give a boost to economic activities as Malaysians have a high tendency to spend,” he said.

Yesterday, the EPF said it expects the i-Sinar facility to benefit two million eligible members, with an estimated advance amount of RM14 billion to be made available.

EPF CEO Tunku Alizakri Alias said the fund has widened the scope of i-Sinar to cover active members who have lost their jobs, given no-pay leave, or have no other source of income.

Eligible members will have access to 10 percent of their savings in Account 1 but will have to ensure they have a minimum balance of RM100 in their account, and the maximum amount allowed to be advanced is RM60,000.

- Bernama