PUTRAJAYA must formulate a plan to ensure that those who have tapped into their EPF funds to weather the several lockdowns replenish their savings for retirement, said economists.

They said the high number of EPF withdrawals shows Malaysians have been pushed to desperation as the economic effects of the prolonged shutdowns hit home.

Penang Institute economist Lim Kim-Hwa told The Malaysian Insight that for many people, the future must wait as it is now a matter of surviving the movement control order.

“The whole notion of not allowing people to get into the retirement pot is wrong.

“In some sense it’s your own pot, you ought to have the right to access your own pot and whether the pot is enough or not when you actually retire is a separate problem,” he said.

Lim said when the economy recovers, the government will have to face the problem of helping future retirees replenish their savings for their old age.

He said this can be done by way of investments and enlarging the economic pie.

“A 1% return (on investment) on a compound effect would solve a lot of problems and that 1% is not difficult to achieve.

“In fund management, the fund manager charges 2% in annual management fees. In a lot of digital solutions, it’s less than 1%. If people were to embrace a digital solution, you immediately get a 1% increase on your return.

“Then it’s a matter of increasing the accessibility of people to lower cost and higher quality investment products. You let people catch up with their retirement savings,” Lim said.

He added the country will also have to grow at a higher rate to lift people out of poverty and ensure that the B40 recoup their savings.

Putrajaya on Monday announced a new EPF withdrawal scheme called i-Citra under the Pemulih aid package to allow contributors to withdraw up to RM5,000 from their retirement savings.

People were previously allowed to make EPF withdrawals to tide them over their financial difficulties brought on by the Covid-19 pandemic. 

The i-Lestari withdrawal facility allowed members aged 55 and below to withdraw between RM50 and RM500 a month from their EPF Account 2 for up to 12 months.

The i-Sinar scheme let members withdraw up to 10% of their Account 1 savings.

In an interview with The Edge Weekly last week, EPF CEO Amir Hamzah Azizan said 6.49 million people applied for the i-Sinar scheme and that RM57.97 billion in total would be paid out.

Amir proposed there should be steps taken to help the fund contributors replenish what they had withdrawn,

According to the EPF manual for retirement, one needs to have saved RM240,000 to retire.

Yeah Kim Leng, economics professor at Sunway University, said those who are considering withdrawing from the retirement savings must consider the impact before doing so.

“That should only be withdrawn for essential things and not for investment or other spending. Whatever savings, use that prudently.

“The duration (of lockdown) may persist longer, we have to brace for a longer period of economic hardship,” Yeah said.

He said the government is kicking the can down the road instead of thinking about the impact such withdrawals will have on retirees.

“This will be one of the fiscal policy challenges in the coming years. After the pandemic, more effort should be focussed on increasing the savings of those who used up all their reserves.

“We can expect more people sliding into hardcore poverty.”

Yeah said in order to help those who have tapped into their savings recover their money, the government should consider raising the minimum wage in tandem with the economic recovery.

The minimum wage is currently RM1,100 nationwide, except for areas under 56 city and municipal councils where the minimum wage is RM1,200.

Anthony Dass, chief economist at Ambank Research, said it was worrying that 42% of the total membership had less than RM10,000 saved in Account 1 while 9.3 million had less than RM10,000 in Account 2.

“The real challenge going forward is serious given that a large number of EPF members have reduced the amount of savings in their Account 1 and Account 2.

“It remains unclear if they can survive going forward even if the withdrawal trend comes back to normal in 2022. They have used their emergency funds,” he said.

Dass said the government will have to look for ways to restore contributors’ savings post pandemic.

“That means creating jobs which in turn means a need to raise confidence and sentiments amongst the business community, investors and households.

“Failing which would result in greater social illness, especially mental illness due to loss of income and savings.” – June 30, 2021.