Spend more on aid, don’t allow EPF withdrawals, Putrajaya told

 

Firdaos Rosli of Malaysian Rating Corporation Bhd says the government should give aid to those in need instead of allowing them to use their EPF savings.

PETALING JAYA: An economist has urged the government to spend more on aid to support the financially strapped rather than allow them to withdraw their Employees Provident Fund (EPF) savings.

Firdaos Rosli of Malaysian Rating Corporation Bhd said there was no doubt that many needed help urgently and the money should come from the government instead of their retirement savings.

The EPF should not be seen as a solution to loss of income, he said.

“Aid for the people should be state-funded, either through taxation, debt or contributions from government-linked companies,” he said.

“The solution is in redistributing wealth and this comes from the government, which can increase its spending and shouldn’t be worried about debt at this point in time.”

Firdaos Rosli.

Firdaos said the government could focus on fiscal consolidation once Covid-19 ceased to be a threat, noting that Malaysia’s debt-to-GDP levels were higher in the 1990s.

Yesterday, Prime Minister Muhyiddin Yassin said Putrajaya was studying proposals on the withdrawal of funds from Account 1 of the EPF.

Firdaos said EPF withdrawals should be allowed only for activities that maximise contributors’ earning capacities or wealth throughout their working life.

He also said the government needed to consider studies showing that 80% of EPF contributors failed to meet the minimum savings target of around RM240,000 by retirement age.

“If their savings are inadequate, retirees would have to increasingly rely on public services such as healthcare, housing and cash aid,” he said.

This would lead to a greater risk of a wider fiscal deficit to support an increasingly large ageing population.

He cited official statistics showing that 15% of the Malaysian population will be older than 60 within the next 15 years.

“Assuming that the retirement age remains as it is, EPF members aged 45 and above would have to work much harder to replenish the savings and returns they have forgone today,” he said.

He said the proposal to allow withdrawals would not benefit everyone since 8.3% of the total workforce comprise those in the informal sector who do not contribute to EPF.

“This is why it is better for the government to fork out the money to help everyone who needs it. This will better ensure that everyone is taken care of,” Firdaos added. - FMT