RECENTLY there has been a nationwide debate over the decision to allow Employees’ Provident Fund (EPF) members to tap into their retirement funds prematurely to see them through the effects of the pandemic.

Most Malaysians welcome the policy to allow withdrawal from their Account 1 savings, although the government and the EPF faced backlash when they announced the terms to qualify for early withdrawal. 

Truth is that Malaysians generally are not keen on saving regularly for retirement in the first place, especially when when it means putting money into an airtight investment vehicle such as the EPF.

There were many instances of EPF members jumping at the chance to reduce their statutory contribution rate when it was allowed. Many members have already depleted their Account 2 savings by buying and renovating their properties.

Many would not contribute to the EPF if it were not required by law while many self-employed and gig workers do not have a formal saving method such as the EPF.

This was plain when Finance Minister Tengku Zafrul Abdul Aziz revealed recently that 32% of EPF contributors have less than RM5,000 in their Account 1 and 10% have between RM5,000 and RM10,000.

Other notable data from the provident fund shows that two in three members have less than RM50,000 savings at the age of 54, and roughly 31% have around RM228,000 saved up for retirement by the age of 55, still falling short of the recommended RM240,000, which equals to roughly RM1,000 per month for 20 years.

Statistics also show that 50% of EPF members deplete their savings within five years and 70% of them in 10 years.

Among our nation’s 32.5 million people, only 14.6 million are EPF members, and among the 15.9 million people in the workforce, only 7.6 million are actively contributing to the fund. 

The truth is, not all are willing contributors, not even when the provident fund has proved to yield decent dividend returns in the past decades.

That leaves us with more than half of the working population not having a “formal” retirement plan.

Of course, the EPF is not the only financial vehicle to prepare Malaysians for retirement.

Some stash their retirement funds in regular saving accounts, mutual funds, property investments, etc. Others bank on pension benefits from their employers after they retire.

However, the above mentioned methods not foolproof as there could be many unforeseen circumstances that could cause them to fail expectations. Only by regularly saving up during the years leading to retirement can one equally distribute the risk of not having enough funds to retire.

Sadly, Malaysians in general have a low financial literacy rate. Only 36% of Malaysian have basic financial knowledge, as pointed out by a study by Standard & Poor in 2015.

That’s far lower than the average rate of 59% in developed countries.

Therefore, many are not aware of how important it is to manage their finances early, and the consequences of not doing so. 

In the current pandemic situation, many have lost their jobs and a large number have had their incomes reduced.

While I agree that the health crisis is of an unprecedented scale, the government is making a wrong move in opening the gates for people to prematurely tap into their retirement funds.

The ongoing political turmoil in our country has led the government to give in to populist ideas. 

We have seen politicians garnering support by putting pressure on the government to dish out more financial aid. Politicians, such as former prime minister Najib Razak, have appealed several times on their personal social media pages to allow withdrawal of the provident funds.

Their appeal has received enormous positive feedback, eventually leading to the government caving in to the pressure despite disagreement from experts and even from the EPF itself.

While the struggle of the people is undoubtedly real, the government, however, should look into other ways to help the people overcome financial hardship, either via direct monetary injections or job creation.

It’s upsetting that due to the uncertainty of our political situation, the government has resorted to policies which could yield results measurable in the short term in the hope of gaining public support in the run-up to the next general election.

One might argue that in these times of hardship, there is no other choice but to tap into our retirement savings, and it’s our money anyway, so it is up to us to decide.

First of all, forced savings such as the EPF, whether you like it or not, help a lot of their members to save up for retirement. It’s only effective because the provident fund locks the money in until you retire. Many people only realise this fact when they retire, and regret later for not saving enough. 

Also, securing yourself financially for retirement is your responsibility, not only to you and your family, but also to the nation.

With Malaysia heading towards being an ageing nation in 10 years, the retirees have to seek help elsewhere if they can’t live on their savings. This situation is exacerbated when life expectancy is increased thanks to medical advancements.

Eventually the government will have to increase funding for social healthcare and other forms of social assistance for the growing elderly population. Consequently, the reduced workforce of the future will have to pick up the tab.

Taxes will be increased, and people would no longer have the luxury of choosing to retire fully or comfortably at their desired age.

With the world now slowly adjusting to the new norm, let this pandemic be a lesson to the people so that they would manage their finances properly, save up for rainy days, and prepare ample emergency funds for needy times so that they don’t have to resort to emptying up their life’s savings to survive.

We don’t know how and when we and our nation will get back on our feet. 

In the grand scale of things, we can’t do much. What we can do is plan our finances properly, and start by saving with discipline. – December 7, 2020.

* Kelvin Lee is a member of Agora Society. Both a dreamer and realist, he is constantly figuring out ways to balance the two. He believes that by defying the norm, one can pave the way for a better future.