No to EPF Account 1 withdrawal

It is ‘irresponsible’ to let people use their own savings when the govt has the capacity to dish out financial aid, says economist

by AZREEN HANI / pic by RAZAK GHAZALI

THE withdrawal of savings from the Employees Provident Fund (EPF) Account 1 is not a viable solution to help cash-strapped individuals manage their economic hardship, experts said.

According to a source with knowledge on the matter, EPF’s board and management have also expressed disagreement over the decision to allow withdrawal from the fund, as the amount of employees’ savings is insufficient to be utilised during their later life.

“The fund (EPF) has their reservation about this, simply because there is a looming economic catastrophe in the future,” the source said.

In a recent interview, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said about 32% of EPF contributors have less than RM5,000 in their Account 1, with another 10% having between RM5,000 and RM10,000.

“It is projected that a total of RM4 billion will be involved in the implementation of this facility. Eligible members can apply for the facility starting January next year,” Tengku Zafrul said during the Budget 2021 presentation last Friday.

Economist Dr Muhammed Abdul Khalid said it is “irresponsible” to let people use their own savings when the government has the capacity to dish out financial aid for the people.

“About two in 10 have less than RM6,000 in EPF, and 50% have an average savings of only RM12,000. This money is for their retirement.

“If they withdraw now, they will have no savings by the time they retire. What is worrying is that nearly half of Malaysian workers do not have EPF, what would happen to them?” he said.

The economic advisor to former Prime Minister Tun Dr Mahathir Mohamad said there seems to be a “misplaced priority” in the government’s financial planning.

“Instead of giving bonus to the ones who have job protection, the government should be channelling it to the bottom 40% (income group) instead. At least, with the cash assistance, it can cover part of the food expenditure for their children.

“The MyKad and Bantuan Sara Hidup database and e-wallet programmes are ready to implement such cash transfers. This will ensure that they are covered in the safety net and they are protected when the next crisis hits,” he said.

On Tuesday, the EPF said it was refining and improving the targeted Account 1 withdrawal facility as announced in Budget 2021.

“All views and feedback from various stakeholders are being carefully considered,” the retirement fund said in a statement.

The EPF said the targeted withdrawal facility should be made based on a detailed study to balance the needs of fund members to address current challenges, while ensuring their retirement savings for future wellbeing.

Last April, EPF introduced the i-Lestari withdrawal facility that allowed members to withdraw RM500 a month for 12 months with a total of up to RM6,000. Up to 4.7 million members benefitted from this facility with a total withdrawal worth RM11.6 billion.

Meanwhile, Socio Economic Research Centre ED Lee Heng Guie said the Account 1 withdrawal should be the last resort for eligible members.

“The EPF needs to be thorough in approving such withdrawals. Maybe if the person has exhausted the i-Lestari, only then he can apply to withdraw from Account 1,” Lee said.

In principle, Lee is also against the withdrawal from a retirement account, but he said the Covid-19 pandemic has brought an unprecedented challenge for the government and the people.

“Of course, ideally, I would ask people to keep their savings, but times are hard and under these circumstances, I think such withdrawal should be allowed. However, this should not be a new norm,” he added.


Read our earlier report here