WORKERS’ retirement savings should not be used to prop up the economy as this will cause them a lot of pain in the long run, said the Malaysian Trades Union Congress (MTUC).

Instead of allowing Employees Provident Fund (EPF) withdrawals to ease Malaysians’ burden amid the Covid-19 pandemic, Putrajaya should increase aid, said the group in a statement.

“With ample financial liquidity in the country, the government should source for funds, including obtaining soft loans from EPF, to help workers, especially the 600,000 who have lost their jobs so far, instead of using their meagre EPF savings for the purpose,” said MTUC secretary-general J. Solomon.

Under the i-Lestari scheme – one of Putrajaya’s stimulus measures to deal with the fallout from the coronavirus – EPF contributors are allowed to withdraw RM500 from their Account Two for 12 months starting April.

EPF said it has approved withdrawals for 3.5 million contributors, involving RM1.66 billion.

“(Although) EPF has the financial strength to absorb billions of ringgit in withdrawals for the next 12 months, the government must not deny the fact that contributors will suffer greatly if they keep withdrawing RM500 per month from their savings,” said Solomon.

Some 60% of contributors have less than RM50,000 in savings, and the sum is not enough to last them in retirement.

Those who participate in i-Lestari will effectively lose RM6,000 over the year, the annual dividend and the compound interest on their savings, added Solomon.

“The government is practically complicit in ensuring the retirement savings of contributors are further depleted and unsustainable for post-retirement.”

He slammed Putrajaya for using EPF savings to help boost spending in an economy battered by shutdowns aimed at curbing the spread of Covid-19.

“(What’s) shocking is that Deputy Finance Minister Abdul Rahim Bakri said the withdrawals are meant to inject an average of RM3.3 billion into the local economy a month.

“His statement makes it patently clear that the hard-earned savings of workers are being diverted and prioritised as an instrument to prop up the economy, especially retail businesses.

“Using workers’ retirement savings to revive the economy is a debatable approach, to say the least.”

It will result in workers not having enough savings in their old age and insufficient funds to buy a house or pay for their children’s education, he said.

“It makes more sense for the government to obtain long-term soft loans to provide direct and sustained financial assistance to workers through various agencies such as the Welfare Department.

“At the same time, the government should use its ample power to keep retrenchments and pay cuts at a minimum after approving billions of ringgit in aid for small and medium enterprises and the business community.” – May 10, 2020.