March 3, 2025
PETALING JAYA – With the Employees Provident Fund (EPF) projecting withdrawals to the tune of RM5bil from Akaun Fleksibel (Account 3), economists say the national economy is set for a boost.
They said the higher dividend payout and the Akaun Fleksibel withdrawals would make EPF accounts conclusively more attractive than savings accounts in banks.
They, however, added a word of caution – relying on an economic upswing just from EPF withdrawal expenditure would not be ideal.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said private consumption already formed 61% of the gross domestic product (GDP), with the country having a relatively high marginal propensity to consume (MPC) which is around 0.60.
“If EPF members spend their Account 3 withdrawals, it will be a boost to the GDP. But certainly we should not rely on such withdrawals as the primary tool to grow the economy,” he said.
Afzanizam said based on past data, higher dividends and an expanded Account 3 did not lead to irresponsible withdrawals.
“The EPF has revealed that 70% of its members tend to keep their savings with EPF under the Akaun Fleksibel. So only 30% withdrew from it for various purposes.
“I suppose it is the opportunity cost for spending the Account 3 withdrawal versus keeping the money with EPF,” he pointed out.
Afzanizam said the EPF has been consistently delivering high dividends which remained above the long-term inflation rate of 2.5%.
“In that sense, EPF contributors would really need to do their due diligence before deciding to withdraw and spend, versus what they stand to gain if they just let their savings to grow until retirement,” he added.
Afzanizam pointed out that the compounding factor would accelerate the pace of accumulation of funds with existing savings reinvested, while continuing contributions would ramp up total returns for contributors.
To boost financial literacy, a pro active stance by EPF will create awareness on the importance of retirement savings to have a positive impact on members savings.
He pointed to EPF’s latest Belanjawanku report which also included the Retirement Income Adequacy (RIA) framework that served as a yardstick to measure savings adequacy for retirement purposes.
“This will help contributors benchmark themselves with their existing savings and on how much they should keep in order to align themselves with the savings benchmark,” he added.
Economist Geoffrey Williams said with the total dividend payout coming up to a staggering RM73.24bil, 10% of it meant that RM7.324bil would be available in the contributors’ Akaun Fleksibel.
“That could be RM7.3bil in potential extra consumer spending if it was all transferred and spent,” he added.
The founder and director of William Business Consultancy Sdn Bhd said this will encourage consumer spending to support growth.
“Since there is a multiplier effect, this could add between 1% and 1.2% to the GDP,” he added.
Williams emphasised that this was a transfer from savings to consumer spending, and not an increase in actual productivity in the economy.
“It is a demand push increase in GDP, not supply side growth,” he said, adding that the high dividends in EPF was risk-free and “very attractive compared to normal deposits”.
“The Akaun Fleksibel allows withdrawals and it makes EPF accounts more attractive than savings accounts in banks.
“So, we can expect and we are seeing an increase in voluntary contributions,” said Williams.
On Saturday, it was announced that the EPF has beaten expectations by declaring a 6.3% dividend for both conventional and syariah accounts in 2024 – its highest since 2017.
The total payout for conventional savings amounted to RM63.05bil while for syariah, it was RM10.19bil – bringing the total dividend payout for both accounts to RM73.24bil.
EPF chief executive officer Ahmad Zulqarnain Onn said an average of RM400mil was withdrawn from the Account 3 each month.
This year, the retirement fund is anticipating some RM11bil to RM12bil to go into the Akaun Fleksibel. Of this, withdrawals are projected to amount to RM5bil.