Govt to study proposal to allow withdrawals from EPF Account 1 – PM

by BERNAMA / pic by TMR FILE

THE government is studying the suggestions to allow certain contributors such as laid off workers to withdraw funds from Account 1 of the Employees’ Provident Fund (EPF).

“I have discussed with the Finance Ministry and we basically agreed and are prepared to study the proposal for contributors who really need to withdraw allocations from Account 1,” Prime Minister Tan Sri Muhyiddin Yassin said here, today.

The government had already implemented a relaxation in 2020 relating to the EPF, especially in allowing workers’ contribution rate reduced to 7.0 per cent from 11 per cent and also the i-Lestari withdrawal from Account 2 of RM6,000 per contributor.

Almost 70 per cent of the EPF members had opted to reduce the workers’ contribution to 7.0 per cent which now have increased the disposable income to close to RM700 million per month, he said in an interview with BERNAMA and local television stations ahead of Budget 2021 on Friday.

At the same time, more than 30 per cent of the EPF members have savings of less than RM5,000 in their accounts, hence, EPF savings may not necessarily address the cash flow problems of the contributors.

“(There are) some who have contributions of less than RM1,000. Hence, EPF savings will not necessarily be able to address their cash flow problem.

“If they draw down then they won’t have any savings for their future,” he said.

Account 1 consists of 70 per cent of the workers’ contribution and is specifically for retirement.

“However, the government is always ready to study the proposal to help the rakyat who are facing difficulties and truly need (the funds).”

As a responsible government, it must balance the short-term needs of the affected individuals with their long-term future and requirements of retirement savings, he said.

On the call by several parties to extend the loan moratorium, Muhyiddin said the government had discussed the matter with Bank Negara Malaysia (BNM) and the Association of Banks in Malaysia.

“The government has received many responses on the need to extend the moratorium especially for those affected.”

Hence, the government will examine the approach to facilitate the process for those who really need support, he said.

“We will study on the method to facilitate the process for those who need support and will announce the decision soon,” he said, adding that consideration will be given to certain groups who are badly affected.

It is to be noted that Malaysia is the only country that provided a blanket moratorium as part of efforts to address the impact from the COVID-19 pandemic.

“There’s no other country that took the approach taken by Malaysia by offering automatic moratorium to all borrowers.This method has advantages in that it gives assistance to many, quickly.”

However, in view that almost all borrowers had taken this moratorium facility, it had reduced the funds for those in need while banking institutions also have reduced funds to provide new loans.

“Thus, the government is switching to a more targeted approach.”

As at Oct 16, 2020, more than 650,000 applications for loan repayment assistance comprising 603,500 individual applications, 43,000 applications from small and medium enterprises (SMEs) and 3,500 applications from other businesses.

Out of this figure, the approval rate given was 98 per cent, he said.

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