February 24, 2023
KUALA LUMPUR – MORE than two-thirds, or some 71%, of active Employees Provident Fund (EPF) contributors aged 55 and below do not have enough money in their EPF accounts to keep them above the poverty level, warns Datuk Seri Anwar Ibrahim.
The Prime Minister said this was due to the four special withdrawals approved during the Covid-19 pandemic.
Anwar, who is also the Finance Minister, stated that the percentage of active contributors who had reached the basic savings target of RM240,000 by the age of 55 had decreased from 36% in 2020 to 29% at the end of last year.
“The EPF estimates that members will need to work four to six extra years to rebuild the savings that were withdrawn during the pandemic,” he said in a written parliamentary reply to Datuk Seri Amirudin Shari (PH-Gombak)’s question.
Amirudin had asked the government to state its stance on EPF withdrawals as a way to help ease the people’s financial burden.
Anwar also noted that any more withdrawals would only worsen the already alarming lack of savings among EPF members.
He added that any additional withdrawals could also affect EPF’s ability to capitalise on new investment opportunities to ensure sustainable dividend payments to contributors in the future.
“As at Dec 31 last year, a total of 6.7 million contributors, or 51% of those under 55, had savings of less than RM10,000 following the withdrawals.
“With this amount, members only have on average RM42 a month in retirement funds over a period of 20 years,” explained Anwar.
He said insufficient EPF savings require attention as the country moves towards an ageing nation status, and that it could have a significant impact on the country and its people, particularly in terms of productivity, social well-being, quality of life and health.
He also pointed out that any new withdrawals would require EPF to allocate more cash flow to replace a large amount (withdrawn) as well as take measures to rebalance its investment portfolio after taking into consideration cash holdings, liquidity and (holdings) maturity, while slowing down domestic investments.
This means that regardless of whether targeted or not, any type of early EPF withdrawal is not the right solution to address the financial burdens faced by contributors.
Anwar noted the social security system should instead be strengthened to ensure Malaysians have enough protection in events such as the loss of jobs and incomes.
“As a huge social security institution, EPF must cooperate with government agencies in building and strengthening a holistic and sustainable social security system for the well-being of Malaysians,” he said.