Economists warn 'society of poverty' if early EPF withdrawal continues
Barjoyai Bardan of Universiti Tun Razak said out of the 14 million Employee Provident Fund (EPF) contributors, 6.3 million are with savings below RM10,000.
"The numbers may go up to 9 million if the government allows more contributors to dig into their old age savings," he told Sinar Daily.
He said EPF targets RM240,000 of savings at retirement age but even that is inadequate as people live longer.
"The contributor would only have RM1,000 monthly to withdraw for the next 20 years," he said.
The aim should be RM1 million of savings at retirement age, and with 6 percent interest every year, the contributor would be able to withdraw RM5,000 to RM6,000 every month, he said.
Even though he said, Prime Minister Ismail Sabri Yaakob had no choice but to allow another withdrawal, as stipulated in the amendments made by the previous administration to allow contributors to withdraw money during emergencies such as Covid and floods, but the conditions should be tightened, he said.
For instance, he said the government should allow those above savings of RM150,000 to withdraw RM10,000, as announced yesterday by the prime minister.
"He may have no choice but to give in according to the amendments made, but he also pleaded to the contributors to use the money cautiously as the long-term impact is grave," he said.
Geoffrey Williams of the Malaysia University of Science and Technology said these new withdrawals announced yesterday will see more people with inadequate pensions.
He said the impact is significant, as highlighted by Finance Minister Datuk Seri Tengku Zafrul Aziz, that the government may have to sell more of its investment assets overseas if the government allows contributors another round of withdrawals from the retirement fund.
Zafrul had said about RM63 billion might be withdrawn, and EPF will have to sell more of its investment assets overseas in this volatile market, given the recent Russia-Ukraine conflict.
Williams said the withdrawals from April 1 onwards will also reduce EPF's holding in Malaysian Government Securities (MGS) and this has a broader financial risks impact.
"This has significant systemic importance.
"This has significant externality implications to all members; it reduces the possible dividend, which could have been 6.7% instead of 6.1%," he added.
Williams said the irony is that the poorest will not benefit from this because their accounts have been depleted from earlier withdrawals under i-Sinar, among others.
Of the 6.3 million with less than RM10,000, 2.6 million have less than RM1,000, and 79% are Bumiputera.
He said there are millions of people who need help after retirement. "We require a full reform of the welfare system long-term," he added.
