KUALA LUMPUR: Economists have warned against the proposal for another round of withdrawals from the Employees’ Provident Fund (EPF), saying it would only result in long-term pains for all.
Prof Emeritus Dr Barjoyai Bardai noted that previous withdrawals had already left millions without pension savings, forcing them to work beyond retirement.
“If we are trying to help the poor and needy, we need to determine what they need this money for. If it is to pay their debt or overdue loans, then we can find other means to help them,” he told Astro Awani.
“Helping them is not by allowing them to withdraw their EPF savings, because that is for long-term investment.”
As of 2021, over six million contributors have less than RM10,000 in savings, of which three million have less than RM1,000 – far beyond the minimum RM240,000 that the EPF deems necessary in order to retire.
Geoffrey Williams, Dean of the Institute of Postgraduate Studies at the Malaysia University of Science and Technology, explained that more withdrawals would only worsen this systematic problem.
He warned that if a similar withdrawal of RM45 billion from last time was allowed, the total withdrawals would be RM200 billion or 20 per cent of the current EPF fund size.
“This smaller fund can cause lower returns for existing members and make it difficult for EPF to maintain a 6 per cent dividend. So everyone suffers,” he said.
“For the wider population, pumping RM45 billion into the economy under current conditions would cause inflation and higher interest rates. So again everyone suffers.”
A group of EPF contributors previously submitted a memorandum to Prime Minister Datuk Seri Anwar Ibrahim to consider a special EPF withdrawal of up to RM30,000.
Pertubuhan Aktivis Rakyat Malaysia (ProRakyat) said the early withdrawal was necessary as a short-term solution for those affected by the COVID-19 pandemic.
If approved, it would mark the fifth round of early EPF withdrawals in three years.
What are Putrajaya's alternatives?
Rather than another set of withdrawals, Barjoyai said it was crucial for the government to focus on boosting EPF members’ savings during their remaining period of employment.
Noting that the EPF only covered workers under formal employment, he also suggested expanding the country’s social protection system beyond the EPF through the establishment of a national social protection institution.
“The government can inject some assets into this foundation… to generate investment income,” he said. “As it accumulates over the next 10 to 20 years, we can see that this will be a credible institution to protect all citizens.”
However, Williams is of the view that boosting savings would be difficult for millions of people as current incomes were too low.
“Helping to raise incomes through better value-added jobs, encouraging multiple income sources through tax incentives and providing income support rather than subsidies should be used.”
He also called for the government to implement a universal basic income system, where “instead of lump sum payments twice a year, these should provide monthly income cash credits directly to (the people’s) bank account so they can spend as they choose and manage better”.
“Above all, we need full reform across the entire welfare and incomes system, including pensions, for long-term security for millions of people.”
Faye Kwan
Tue Jan 31 2023
As of 2021, over six million contributors have less than RM10,000 in savings, of which three million have less than RM1,000.
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