KUALA LUMPUR (Jan 6): The Malaysian Institute of Economic Research (MIER) said it does not support the proposal for Employees Provident Fund (EPF) members to further withdraw money from their EPF accounts to mitigate the financial impact from the Covid-19 pandemic as the pension fund is not designed to deal with calamities and pandemics.
In a statement on Wednesday (Jan 5), MIER said the EPF is instead intended to ensure that its contributors enjoy a decent life after retirement.
"MIER strongly feels that sound economic reasoning should guide EPF withdrawals, not populist policies,” the institute said.
According to MIER, Malaysians have undergone an unprecedented period of hardship in the past two years since the Covid-19 pandemic began in early 2020.
The government-initiated withdrawal schemes — i-Lestari, i-Sinar, and i-Citra — that amounted to RM101 billion, while managed to provide some financial relief, have resulted in severe depletion of retirement funds for most of the EPF's members, MIER said.
MIER said the mass withdrawals have resulted in 6.1 million EPF members now having less than RM10,000 in their EPF accounts, with 3.6 million members having less than RM1,000 in their retirement fund.
"This level is undoubtedly a far cry from the threshold of RM240,000 essential savings by the age of 55 for members to enjoy a dignified retirement.
"The previous three EPF withdrawal schemes were short-term measures, which should have been avoided in the first place, and must never be repeated. 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.
"Long-term measures are imperative to ensure that the members have adequate savings for retirement,” MIER said.
MIER said the government must consider broader social protection and social safety net strategies because there should be contingency plans and schemes that can kick in in the face of calamities and other crises.
According to MIER, lessons from recent past have taught the nation that it cannot be complacent since emergencies and unexpected disasters can occur.
"The burden of these events is usually worst felt by those who are least prepared to face them, and they need the government’s support to rebuild their lives. A disaster relief fund should also be considered.
"At the same time, the coverage and adequacy of social protection, particularly towards the self-employed and those in the informal sector, must be strengthened.
"The post-retirement well-being of the EPF members is at stake if the government yield to the demand for further withdrawal of EPF funds. Instead, the government has to consider other policy measures that ensure that EPF members are secure in their hopes for a better future,” MIER said.
MIER warns that Malaysia is expected to become an aged nation in 2030, and further EPF money withdrawals will put additional pressure on the future cost of healthcare, income security and a post-retirement income stream.
This article was originally published at https://www.theedgemarkets.com/article/mier-sound-economic-reasoning-should-guide-epf-withdrawals#