EPF withdrawals should be a last resort policy - Ideas

23 Mar 2022 11:55am

Ideas warns that the government’s recent decision to allow another withdrawal of up to RM10,000 from EPF savings risks leaving even more EPF contributors with insufficient savings once they reach retirement.

SHAH ALAM - The Institute for Democracy and Economic Affairs (Ideas) believes that the withdrawal of money from the Employees Provident Fund (EPF) should be a last resort policy and only be used in emergency situations.

This, its chief executive officer Tricia Yeoh said was because the government’s recent decision to allow contributors to make another withdrawal of up to RM10,000 from their EPF savings would leave them with insufficient savings once they reached retirement.

According to Yeoh, instead of allowing EPF contributors withdraw the money from their EPF account, existing funds such as the National Disaster Relief Fund (TBBN), the National Disaster Relief Trust Fund (KWABBN) and zakat (religious alms) should be utilised.

"As highlighted by EPF, this led to a total of 6.1 million members now having less than RM10,000 in savings in their retirement funds. EPF further emphasised that as of October 2021, 3.6 million contributors have less than RM1,000 in their accounts. From this group, 2 million Bumiputera members have less than RM1,000 as savings

“With the economy recovering and the job market strengthening with the absence of lockdowns, Ideas believes that EPF withdrawals should be used as the last resort in emergency situations only," she said in a statement.

Yeoh added that although the government's effort to provide immediate relief to low-income citizens struggling in the aftermath of the Covid-19 pandemic and the massive floods was wise, it was against EPF's main goal.

She said EPF was specifically set up to provide a social safety net for pensioners in Malaysia and as such, the withdrawal and its timeline need to mirror that objective which was for retirement purposes and for those purposes alone.

She said the decision to allow EPF withdrawals will further impact the inflationary pressure on global energy, commodity, the expectations of central banks raising interest rates as well as having a great impact on Bursa Malaysia.

Meanwhile, she said the government should focus on establishing formalised social safety nets which would be able to cover both formal and informal workers.