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When it comes to any policy changes involving the EPF, Malaysians generally do not skip reading such articles. These reports get a lot of views and are shared on social media.
Naturally, the current debate on the merits of allowing members to withdraw their savings from Account 1 to get through this difficult time is getting a lot of eyes.
For private sector workers, who number almost 14 million in the country, the HBS is an issue close to the heart of more than half of them, since they are active taxpayers. This is the only mandatory provident fund to which both employers and employees contribute on a monthly basis. The total amounts to a minimum of 20% of base salary, although some employers give higher contributions for certain personnel based on seniority.
Provident funds are based on retirees having sufficient funds to survive their golden years with dignity and good health and without having to rely on the support of their children if they can help it. According to the EPF findings, a retiree needs a minimum of RM228,000 to live on enough for 20 years after retirement. And this is also based on a poverty line household income of RM930 per month.
Now here’s the scary part that should wake up every Malaysian with a jolt.
According to the EPF, around 70% of its 54-year-old members have less than RM 50,000 in their savings. A simple calculation will show that this will last only five years at most.
So it is estimated that 20% of the 14 million members have an average savings of just over RM6,000.
I’m sure this amount must have been reduced for some after a certain category of taxpayers were allowed to withdraw RM500 monthly from March to December under the i-Lestari scheme when the government announced the first Covid-19 incentives in April.
According to EPF, 70% of members who withdraw their funds at age 55, the mandatory full retirement age, use their savings less than 10 years after they retire. Most, if not all, also make their one-third retirement when they reach 50 as allowed by the EPF Law.
What does all this show? The simple fact that at the current rate, EPF savings are definitely not enough to keep households out of poverty after retirement. Remember that the cost of living also increases over time, making it even more difficult for people to lead their families. All of this indicates that the government will soon face the enormous burden of caring for the elderly.
According to the Department of Statistics, there have been changes in the age structure of Malaysia during the last 10 years; those under 14 years of age decreased steadily and the number of those over 65 increased. In general, Malaysia is considered to be unfit to meet the needs of the aging population.
Most do not have health insurance, forcing them to go to government hospitals for medical care. Many of them don’t have enough savings, making them dependent on their children and the government for cash assistance. But as most of us know, the burden of caring for the elderly will fall on a shrinking base of young people.
If the government were to now allow a special pandemic withdrawal from Covid-19, as some advocate, I am afraid that everyone who will accept this offer will be from the lower and middle income groups. And these will be part of the 54% of taxpayers who have already been projected to have insufficient funds to go through their post-retirement phase.
Obviously, people with medium and high income will not require this facility. Most others may need this help, but knowing Malaysians, even those who can do without it, will ask to withdraw, ignoring the long-term consequences, such as reduced pension savings.
That said, the fact is that a large group of Malaysians are in dire need of help right now. Of course, the government’s goal is to stimulate consumer spending with higher disposable income. But we have to ask ourselves if this should be done knowing pretty well that most will end up not having enough in their old age.
On a personal note, I do not consider allowing the withdrawal of EPF as a form of government assistance. After all, it’s the hard-earned savings of members and it was their own money that went into the fund. This “help” will only result in a loss of a lot of compound interest and the depletion of your long-term savings.
One way out would be for the government to offer interest-free loans to those who really need them, allowing repayments to begin in early 2022 or after the Covid-19 situation improves. Relevant authorities and banks can work together to implement the plan.
Uncertainties in old age are part of life. Therefore, having enough in the EPF nest is the best way to deal with such demands. Remember, we live in a time when some children have thrown filial piety out the window, abandoning their parents in old age. Surely we don’t want the elderly to end up begging in the streets.
Don’t touch the EPF, think of other options.
The opinions expressed are those of the author and do not necessarily reflect those of FMT.
