EPF withdrawals not viable solution to cash flow issues, say analysts

 

Some 6.1 million EPF contributors aged below 55, or 48% of its total members, had savings of less than RM10,000 in their accounts as of December 2021.

KUALA LUMPUR: Just RM42 to spend every month for 20 years after retirement.

This is the grim reality awaiting some 6.1 million Employees Provident Fund (EPF) contributors aged below 55, or 48% of its members, who had savings of less than RM10,000 in their accounts as of December 2021.

These statistics were shared by EPF chief executive officer Amir Hamzah Azizan in March last year while commenting on the status of its 12.6 million members’ retirement funds following three special withdrawals, namely i-Lestari, i-Sinar and the latest i-Citra in February 2022.

Analysts say the EPF’s objective of ensuring the economic well-being of the nation’s workforce post-retirement will suffer a setback if fresh requests for another special withdrawal are approved.

They view the repeated EPF withdrawals as not viable to help people cope with the higher cost of living.

Universiti Putra Malaysia’s (UPM) human ecology faculty dean, Fazli Sabri, said the cost of living issue is among the factors compelling people to opt for EPF withdrawals as they see it as easy access to cash.

He said this is why the government should focus on dealing with the rising cost of living comprehensively and take proactive measures to help those who have lost their jobs, as well as petty traders struggling to keep their businesses going.

“The government has to seek comprehensive solutions because the rising cost of goods is not just a local issue but a global one as other countries such the US and the UK as well as European nations are also facing the same issue.

“If (EPF) contributors want to withdraw their savings for this reason (cost of living), we’re worried about the challenges that await them in future. The economic conditions may be even more challenging then, and how are the contributors going to survive with so little savings?” he said.

Fazli said the commitment to addressing the rising cost of living given by the unity government when it came to power is a challenge that it must take up to relieve the financial burden of the people.

To this end, he said, the government must introduce a continuous stream of initiatives to strengthen supply chains and food security to bring down prices.

Recently, a group called Pertubuhan Aktivis Rakyat Malaysia (ProRakyat) urged the government to consider allowing another round of EPF withdrawals of up to RM30,000.

Its president, Khairul Anuar Othman, said the one-off withdrawal of between RM10,000 and RM30,000 is a short-term solution so the people will not run out of cash.

He said some EPF contributors are still reeling from the effects of the Covid-19 pandemic, including those who lost their jobs and others who have outstanding bank loan repayments.

Implications

In response to ProRakyat’s proposal, Prime Minister Anwar Ibrahim said the government will have to consider the plight and the future of EPF contributors before they are allowed another round of special withdrawals.

He said it was better for the government to look for other effective options.

Fazli said allowing a series of EPF withdrawals will have serious implications on contributors after they retire.

“The people must go back to the original purpose of contributing to EPF,” he said. “EPF is a retirement savings fund so it will be problematic for the members if they don’t have enough savings when they retire. How can they expect EPF to help them?” he said.

According to EPF records, 2.6 million contributors had savings of less than RM1,000 as of December 2021, an increase of 86% from the 1.4 million members with savings of less than RM1,000 in April 2020.

Non-cash initiatives

Fazli said the government can also consider implementing non-monetary approaches that will not add more burden to its financial resources.

These include providing employment opportunities to those who had lost their jobs through collaborations with government-linked companies and government-linked investment companies.

Nurul Shahnaz Ahmad Mahdzan of Universiti Malaya’s business and economics faculty said the government should provide more initiatives to empower the gig economy and small and medium enterprise (SME) sector.

“Empowering these two platforms is the right approach to improving the economy of the people of this country.

“The government had previously given them (companies) cash incentives but I feel there’s no need for these. Maybe it can give incentives through tax deductions for companies that create job opportunities,” she said.

Nurul Shahnaz said zakat centres can also play a role here by extending assistance to those from the non-hardcore poor category who have lost their livelihoods.

She is confident that such a move will divert the people’s attention from EPF which “seems to have become their piggy bank”.

“It may also be possible for aid to be given to non-Muslims, for example, in the form of capital for them to start a business,” she said. - FMT