Hope the govt will continue to develop its policy in response to the current direction, says IDEAS director
by ALIFAH ZAINUDDIN/ pic by TMR FILE
EMPLOYEES Provident Fund (EPF) announced that private sector employees can withdraw up to RM500 from their Account 2 starting May 1.
Its CEO Tunku Alizakri Raja Muhammad Alias said members may apply for the i-Lestari Account 2 withdrawal scheme from April 1, with the savings expected to be deposited into their bank accounts from May 1.
“The i-Lestari will provide some relief to those financially affected during this period of concern and uncertainty.
“As a retirement fund, the EPF has to strike a balance between our mandate to safeguard our members’ retirement savings and caring for their wellbeing,” Tunku Alizakri said in a statement yesterday.
He said the withdrawal would require an amendment to Section 54 (6) of the EPF Act 1991. However, Tunku Alizakri said the fund is placing i-Lestari as its top priority for urgent rollout.
Yesterday, Prime Minister Tan Sri Muhyiddin Yassin announced four additional relief measures largely aimed at improving cashflow in low-income households. Muhyiddin said the measures were part of a more comprehensive economic stimulus package to be unveiled by the end of March.
The four measures include further withdrawals from the EPF pension scheme of up to RM500 per month over the next 12 months, 4% reduction of EPF contribution (taking effect next month), an extension to the student loan repayment period and capital injections to the Health Ministry (MoH), as well as state governments.
Institute for Democracy and Economic Affairs (IDEAS) director Laurence Todd said it is encouraging to see the government updating their policies in light of the unfolding crisis and increasing resources to MoH, which he described as a “priority” to address the pandemic as fast as possible.
“However, I do have some concerns over the use of EPF savings to substitute income during this period as savings levels are generally quite poor among Malaysians especially the low-income earners and this will cause them to decline further.
“I also believe there is a collective responsibility to support those who are falling on hard times because of the measures we are taking to protect society from the virus.
“The government has taken steps to address this, through the Household living Aid (BH) and Employment Insurance Scheme, but I believe these measures need to be expanded and widened in scope to ensure that self-employed and informal workers are also protected,” he told The Malaysian Reserve.
Todd hoped that the government would continue to develop its policy in response to the current direction.
Meanwhile, Sunway University Business School economist Prof Dr Yeah Kim Leng said any additional cash would be helpful to ease the financial burden of large families in low-income households with no or meagre savings apart from monies held under the EPF scheme.
“However, depending on individual financial standing, the withdrawal should be the last resort. It is advisable to use whatever savings deposits they have in the bank first, considering the interest income is lower than EPF’s dividend,” said Yeah, who is also Bank Negara Malaysia (BNM)’s monetary policy committee.
Khazanah Research Institute researcher Christopher Choong Weng Wai highlighted the need to change the strategy of the economic support package from a stimulus approach to a protection plan.
“The short-term strategy should shift away from stimulating economic activities to protecting businesses and households so that they have sufficient resources to ride out the shocks of the next few months and can restart production as soon as the crisis is over.
“Additionally, with more people being put out of jobs, plus some employees opting to continue with the original 11% EPF contribution rate, the RM13 billion additional disposable income derived from the reduction in the contribution rate would likely be overestimated,” Choong said in an article published yesterday.
He said the government would also need to reallocate some resources in this protection strategy approach, while BNM should continue to ensure that there is sufficient liquidity in the financial system so that banks can continue extending payment moratoriums to affected businesses and households.