The Malaysian Reserve: No to short-term populist measures on EPF withdrawal
Instead, govt should provide sufficient unconditional cash assistance to the households and firms
ECONOMIC research houses have rejected the notion of further withdrawal on the employees’ retirement fund, saying that sound economic reasoning should guide the Employees’ Provident Fund (EPF) withdrawals, not populist policies.
“The previous three EPF withdrawal schemes were short-term measures, which should have been avoided in the first place, and must never be repeated,” the Malaysian Institute of Economic Research (MIER) said in a statement yesterday.
“Instead, to address the short-term fiscal constraint Malaysians face, there is a strong economic justification for the government in providing sufficient unconditional cash assistance to the households and firms,” it added.
MIER stressed that the EPF is not designed to deal with calamities and pandemics. Rather, it is intended to ensure its contributors enjoy a decent life after retirement.
This, it said, is compounded by the fact that Malaysia is fast becoming an ageing society.
“Malaysia is just eight years short of becoming an aged nation in 2030, and further EPF withdrawals will put additional pressure on the future cost of healthcare, income security and a post-retirement income stream,” said MIER.
The Malaysian Reserve (TMR) reported yesterday that eight out 10 EPF members will retire in poverty as the median savings for the bottom 40% income group (B40) of the members was reduced by 61% to RM1,000 and the median savings for the middle 40% income group fell 17% to RM24,000.
This would translate to having only RM4 a month to spend for 20 years for the B40.
Experts told TMR that the government should no longer consider the calls to allow depositors to withdraw from the EPF anymore.
MIER proposes for the government to adjust the employer’s EPF contribution rate without increasing the employers’ labour cost burden.
“The government can marginally increase employers’ contribution rate for workers above a specific threshold limit and simultaneously decrease the rate for those below the threshold level.
“For example, employers with a monthly income of RM20,000 or more can be lowered by 1%, and the contribution rate of employers with a monthly income of less than RM5,000 can be increased by 1%,” said MIER.
This measure, it said, will not increase the burden on employers and yet will serve to address the question of equitability.
“The government must also consider broader social protection and social safety net strategies. There should be contingency plans and schemes that can kick-in in the face of calamities and other crises.”
Another research outfit, Bait Al Amanah, said repeated withdrawals will only lead to shrinking capital, jeopardising the ability of EPF to generate income and better dividends.
“Calls for repeated withdrawals do not align with the raison d’être of the retirement scheme. As evidence, there is no provision in EPF Act 1991 that permits withdrawals under natural disasters.
“Instead, the act clearly states that Account 1 is meant for retirement, while Account 2 is designated for discretionary withdrawals aimed at securing a better retirement in the future,” it said.
“In a nutshell, we need to reinforce EPF’s position as a trustworthy provident fund and dependable trustee to members’ retirement future.”
Bait Al Amanah urges the government to expand the various forms of financial aid to individuals and businesses to recover from the floods in the immediate term, instead of caving in to the demands for Malaysians to dip into their retirement funds.
“In the long term, we need to revaluate and reform the coverage of social protection measures for communities across Malaysia to effectively address vulnerability to poverty,” it said.
This article was originally published at https://themalaysianreserve.com/2022/01/07/no-to-short-term-populist-measures-on-epf-withdrawal/
Comments