EPF: Inconsistent contributions among factors for members' low savings

 

Lower starting salaries for those who began their careers before the implementation of the minimum wage in 2013 are among the factors contributing to Employees Provident Fund (EPF) members aged between 40 and 54 years having less than RM10,000 in savings.

In a statement today, EPF said another factor was structural wage challenges, whereby 44 percent of EPF’s contributors earn less than RM2,000 and 81 percent of them have an income of less than RM5,000.

“Also, inconsistent contributions that were due to members shifting in and out of the formal sector; where only 45 percent of the 4.81 million members in this age group made contributions in 2022, while the rest did not contribute at all last year.

“In addition, only half of the private sector labour force, who is under formal employment contracts, are mandated to contribute to the EPF and the remaining comprises individuals in other sectors, such as agriculture or informal work, or contract workers and business owners,” said the statement.

The other factor is that 59 percent of the 2.85 million members in this age group applied for Covid-19-related withdrawals and withdrew more than RM62 billion in total.

As of the end of December 2022, there were 4.81 million EPF members in the 40-54 age range, 2.17 million of which were active members and 2.64 million inactive members (defined as having made no contributions in the past year).

The EPF, meanwhile, welcomes the government’s move to contribute RM500 on a one-off basis to both active and inactive members, to encourage more Malaysians to increase their retirement savings.

This incentive will serve as a catalyst for members to rebuild their savings, and achieve a dignified retirement, which in turn will help mitigate the impact of Malaysia’s rapidly ageing population, it added.

Prime Minister Anwar Ibrahim, when tabling Budget 2023 on Feb 24, said the government had agreed to raise the EPF Account 1 contribution by RM500 for members aged between 40 and 54 years with less than RM10,000 in savings.

- Bernama