KWSP needs to focus on increasing returns and spreading awareness
SYDI ALIF26 Jan 2023 07:47pm
Image for illustrative purposes only - FILE PIX
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Following Covid-19 outbreak and economic crisis in the country, several withdrawals, such as i-Lestari, i-Sinar, and i-Citra, have reduced KWSP contributors' ability to sustain living costs post-retirement.
Over half of KWSP members, or about 6.67 million people, have less than RM10,000 of savings, which leaves a huge gap to reach the target basic savings of RM240,000.
Citing that continuous withdrawal is not only like killing a golden egg-laying goose, Lee said that it would take another three to five years for the savings to return to their original level, on top of decreasing the contributor's assets.
To address this issue, Lee had recommended three solutions, namely the implementation of a tiered dividend, an increase in foreign investment, and a limitation on withdrawals.
On the implementation of tiered dividends, a policy should provide the highest dividend for the first RM50,000 of savings contributions, RM50,000 to RM240,000 of savings (the basic savings target), and RM240,000 and above of savings.
If the contributor has more than RM1 million in savings, the person can still get a high dividend for RM50,000 in savings.
In regards to foreign investment, the KWSP achieved a return of 8.64 per cent for international investment and 5.02 per cent for local investment in 2021. Increasing the investment mandate at the international level will make the EPF more productive as well as more professional.
Finally, Lee suggested limiting withdrawals for those over 55, considering their retirement needs.
