MFPC rejects EPF withdrawal schemes, urges initiatives under PRS

Further withdrawals from members’ retirement nest egg may cause bigger problems in the future, particularly after retirement 


THE Malaysian Financial Planning Council (MFPC) supports the government’s decision against further Employees Provident Fund (EPF) withdrawal schemes. 

“While we empathise with the rakyat’s struggles during the present times, further withdrawals from their retirement nest egg may cause bigger problems in the future, particularly after retirement,” the council said in a statement yesterday. 

“The approach of using EPF savings for emergency needs will certainly cause a severe impact as members face very low savings in their retirement years, compounded by other uncertainties such as rising healthcare costs.” 

It noted that the issue of insufficient savings is at an alarming stage as the median savings of the bottom 40% group income was at RM1,000. 

“If this level continues until their retirement, they would have only RM4 a month to spend for 20 years, and for the middle 40% group income, their savings of RM25,000 would translate into RM104 a month for the same period.”

In view of the fact that compulsory EFP savings are clearly not sufficient for many contributors to survive during their retirement years, MFPC strongly encourages initiatives to encourage and offer incentives for long-term saving through the Private Retirement Scheme (PRS).

“This, we are positive, will help ameliorate the issue of insufficient retirement funds,” MFPC said. 

The Malaysian Reserve reported last week that research houses have rejected the notion of further withdrawal on the employees’ retirement fund, saying that sound economic reasoning should guide the withdrawals, not populist policies. 

The Malaysian Institute of Economic Research said that the EPF is not designed to deal with calamities and pandemics. Rather, it is intended to ensure its contributors enjoy a decent life after retirement. 

Meanwhile, MFPC added it is imperative for all parties to take appropriate actions to address the retirement saving issue and provide them with critically-needed retirement planning advisory services. 

“To augment our, the government and various authorities’ efforts, we urge financial institutions to upgrade their financial intermediaries including bankers, unit trust consultants and insurance agents in professional knowledge and skills to provide Malaysians with the critically-needed retirement planning advisory services. 

We are confident our collective collaborative initiatives will benefit Malaysians in looking forward to financially secure and stress-free retirement and old age,” it said. 

MFPC’s own national 2020 study on Financial Capability and Utilisation of Financial Advisory Services in Malaysia reveals that an alarming number of Malaysians generally have low financial capability, do not know how to manage their money, and do not plan and save. 

Poor financial literacy among Malaysians is one of the main reasons for the low savings of around 36%. This lack of financial literacy could leave the next generation of retirees significantly poorer and sicker (due to not having enough savings to afford proper healthcare). It creates the risk of a “lost generation” of older people entering retirement in poor health and without enough money as support. 

MFPC said it is committed to raising Malaysians’ awareness of the importance of financial planning, of which retirement planning is an integral component. 

“Our various year-round programmes in financial planning devoid of any element of commercialisation or payment for Malaysians of various ages and backgrounds attest to this,” it said, adding that MFPC’s programme has benefitted at least 500,000 Malaysians nationwide since 2007.