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PUTRAJAYA: Allowing workers to withdraw from the Employee Provident Fund (EPF) to overcome the economic impact of Covid-19 will deplete their savings but can help with the economy, experts say.
They said this after the Prime Minister announced that the government is studying suggestions to allow certain taxpayers, such as laid off workers, to withdraw funds from Account 1 of the EPF.
“I have spoken with the Ministry of Finance and we basically agreed and we are prepared to study the proposal for taxpayers who really need to withdraw allocations from Account 1,” Prime Minister Tan Sri Muhyiddin Yassin said here yesterday.
The government has already relaxed the rules twice this year by reducing the workers’ contribution to the EPF from 11% to 7% and allowing i-Lestari to withdraw RM6,000 from Account 2.
Almost 70% of EPF members had chosen to reduce their contribution to 7%, increasing total disposable income to almost RM700k per month, he said in an interview with Bernama and local TV stations ahead of tomorrow’s Budget 2021.
However, since more than 30% of EPF members have less than RM5,000 in their accounts, this may not help address the cash flow issues that taxpayers face.
“(There are) some who have contributions of less than RM1,000. So EPF savings won’t necessarily be able to address your cash flow problem.
“If they retire, they won’t have savings for their future,” he said.
Account 1, destined for retirement, represents 70% of a worker’s EPF savings.
“However, the government is always ready to study the proposal to help the Rakyat who are facing difficulties and really need (the funds),” he said.
Responsible government must balance the short-term needs of affected people with their long-term future and retirement savings requirements, he added.
Regarding the call from various parties to extend the loan moratorium, Muhyiddin said the government had discussed the matter with Bank Negara Malaysia and the Malaysian Banking Association.
“The government has received many responses about the need to extend the moratorium, especially for those affected,” he said.
The government will examine the approach to facilitate the process for those who really need support, he added.
Penang Consumers Association President Mohideen Abdul Kader said that many Malaysians live without savings and their money should be kept in EPF for retirement.
“If withdrawals are allowed, there will be poorer people in Malaysia. People have to learn to live a simple lifestyle, ”he said.
Mohideen said CAP has evidence that those who withdrew their EPF funds often finished spending them within a few years.
“So that the money is kept in EPF. It is the bank of the poor, ”he said.
Mohideen proposed that the government, instead, extend the moratorium and make loans to those who need them.
“We should not create more beggars,” but people who can fend for themselves, he said.
Meanwhile, the Vice President of the Malaysian Trade Union Congress, Mohd Effendy Abdul Ghani, welcomed the government’s decision to review the proposal to withdraw from Account 1 of the EPF.
“I think that’s the right way to boost our economy. Because when people have money to spend, it will help boost the economy internally, ”he said.
However, he wanted the government to carry out more studies before deciding the limit for retirement.
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