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PETALING JAYA: The unprecedented measure to allow withdrawals from Account 1 of the Employee Provident Fund (EPF) in the 2021 Budget is a short-term measure for long-term survival, says EPF CEO Tunku Alizakri Alias .
In an immediate response to the 2021 Budget presented in Parliament on Friday (November 6), Alizakri said that it was an action deemed necessary at this time due to the challenges that taxpayers face during the Covid-19 pandemic.
“The pandemic has presented us with unforeseen and severe challenges, especially with regard to loss of employment and source of income.
“Allowing members to access their EPF retirement savings other than those provided in the 1991 EPF Act is unprecedented and has never been done before. Account 1 (70% of savings) has always been designated for retirement, while Account 2 (30% of savings) is intended for discretionary withdrawals.
“Given the complexity of the situation, it was not an easy decision to be made in a hurry.
“However, we found a middle ground to allow members to access their savings without jeopardizing their future retirement,” he said.
EPF currently represents almost 50% of Malaysia’s population with a total of 14.6 million members.
Alizakri added that the additional withdrawal facility is very specific and is aimed at members who really need the cash relief.
“This will be a once-in-a-lifetime, short-term facility that will provide some relief to the most vulnerable and unprotected groups, while upholding the EPF’s mandate to safeguard members’ retirement savings.
“While the EPF aims to allow the request for the additional directed takedown facility to proceed in January 2021, more details on this will be announced (later this month),” he said.
Alizakri also said that the EPF is also considering allowing taxpayers to withdraw from their Account 2 to purchase takaful insurance and products that cover life / family and critical illness from approved insurance and takaful carriers.
“The products, which will be offered through i-Akaun, will be customized for EPF members at affordable premiums and will come with additional features.
“In addition to this, the EPF also welcomes the government’s decision on reducing the minimum legal contribution rate for employees to 9%, from January to December 2021, which takes into account the depressed economic situation, as well as the reduced income of our members.
“We have to live with the Covid-19 pandemic for the next few years. We hope that the extra money in the pockets of our members will increase their disposable income and stimulate domestic consumption, ”he said.
Alizakri also noted that earlier this year, the EPF had the i-Lestari withdrawal mechanism to allow members to voluntarily reduce their share of the EPF contribution to 7% from 11% from April to December.
The fund also introduced the Covid-19 Employer Assistance Program (e-CAP), which allows eligible small and medium-sized businesses (SMEs) the flexibility to request a deferral or restructuring of the employer’s share of contributions to the EPF.
The Malaysian Trade Union Congress (MTUC) also supported the measure to allow withdrawals from Account 1.
Its president, Datuk Abdul Halim Mansor, said this would provide much-needed relief to those who were struggling financially amid the Covid-19 pandemic.
“This shows the intention of the government to help the rakyat and to help the target groups,” he said.
“Also starting in January 2021, workers can expect a higher net salary when their monthly contribution to the EPF is reduced from 11% to 9% for 12 months,” he noted.
He added that while the MTUC supported such moves, it is also concerned that the outflow of funds from the EPF could reduce annual dividends for members.
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