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Help EPF savers replenish accounts after pandemic withdrawals: Economist

Help EPF savers replenish accounts after pandemic withdrawals: Economist

PETALING JAYA: Millions of Malaysians will face economic hardship if nothing is done to help them replenish their EPF savings after being allowed to make four withdrawals during the Covid-19 pandemic to help overcome financial problems.

Universiti Tun Abdul Razak economist Dr Barjoyai Bardai said about 6.1 million Malaysians need help to boost their EPF savings after making withdrawals during the pandemic.

He said EPF could work with financial institutions or the Treasury to provide a loan of up to RM50,000 with a very low interest of about 1% to help boost EPF savings.

“The loan has to come with rules such as those taking it cannot make a withdrawal at 55, but only when they reach 60.

“The money must go directly to EPF to boost savings, and over 10 years, the savings can increase by more than RM50,000 if contributions from the employee and employer are taken into account, based on 6% returns per year.”

He added that the loan, with interest, must be paid back before the person is allowed to withdraw the balance.

“Asking an employee to increase their EPF contribution, especially with the rising cost of living, is not feasible,” he said.

“The best option would be to get employers to agree to increase their portion of the contributions voluntarily.

“If nothing is done, people could end up being hardcore poor once they have depleted all their EPF savings, leaving the government with no choice but to step in to help them.”

Barjoyai said by helping them now, they will not be a long-term burden as the debt will grow if those with low EPF savings seek help when they retire.

Last week, Deputy Finance Minister Datuk Shahar Abdullah said Covid related programmes over the past two years had reduced EPF members’ savings by about RM155 billion.

About RM145 billion was withdrawn through several EPF facilities, while EPF members suffered a loss of RM10 billion when the statutory EPF contribution amount was reduced between April 2020 and June 2022.

Based on EPF statistics, about 6.1 million members currently have retirement savings of less than RM10,000 in their accounts, of which 3.6 million households have less than RM1,000.

Malaysian Employers Federation president Datuk Dr Syed Hussain Syed Husman said the current EPF statutory rates of contributions are sufficient.

He said increasing the rates of contributions to EPF will not guarantee that the employees will have adequate savings upon retirement.

There is a need to go back to the principle that EPF is meant for old age and no withdrawal should be allowed before the employee retires, Syed Hussain said.

“Employers should train employees on financial literacy early on and not just before the employees reach retirement age.

“This will ensure employees are aware of the importance of keeping their money for retirement and not depend fully on their EPF savings after retirement.”

On extending the current retirement age of 60 years, he said it should be maintained, and that employment beyond this age should be based on mutual agreement.

Syed Hussain said the government should also introduce tax incentives for those working beyond 60.

“Currently, Malaysia is an ageing society, with 7.5% of the population above 60. We are expected to be an aged society by 2030 when some 15% of the population will be 60 and above,” he added.

Finwealth Management Sdn Bhd financial planning director Felix Neoh said employees will have to continue to save for their retirement either through EPF or on their own if they have depleted their EPF account.

“Employees can top up their EPF accounts on their own. Employers have the option to increase their contribution (tax deductible up to 19%) or raise the income of their employees if it (the company) can afford it.”

He said SMEs are struggling financially, so this might be a tall order. But employers have to be more transparent and willing to share the business success with their employees, especially loyal and long-service ones.

Based on EPF statistics, about 6.1 million members currently have retirement savings of less than RM10,000 in their accounts, of which 3.6 million households have less than RM1,000. – Bernamapix

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