‘Allowing further EPF withdrawals could backfire on contributors in old age’

KUALA LUMPUR – Allowing more Employees’ Provident Fund (EPF) withdrawals before contributors reach retirement age will result in a social crisis where the elderly will be strained financially.

Putra Business School economist Associate Prof Abu Sofian Yaacob said it is not a good idea to allow further EPF withdrawals, as this will lead to dwindled savings that may not be enough to sustain their retirement.

“For example, if the contributor is 40 years old and there is only 20 years left to reach the retirement age of 60.

“In such a short time, I don’t think they can have RM100,000 to RM150,000 in their EPF savings, unless their salaries are high.

“If a person has withdrawn from EPF four times, or a ceiling of RM40,000, how much is left in the account? 

“The law also clearly says that EPF funds can only be withdrawn after retirement age,” he told Getaran.

Instead, he said, the government should implement a holistic approach, such as consistent intervention on the essential food supply chain. 

He added that the government should carry a study on ways to ease the rising cost of living, especially for the B40 group.

This includes, he said, for employers to include mandatory increments where the quantum is based on work performance, inflation rates, and current economic conditions.

“At the minimum, the increment rates should mirror the inflation rate. Some employers make large profits but do not realise that it is not possible without their workforce. 

“It would be good to amend the law to include salary revisions every three or five years as well as mandatory increments.”

One-off EPF withdrawals again became a talking point after a group known as Pertubuhan Aktivis Rakyat Malaysia submitted a memorandum to appeal for the government to allow another withdrawal of RM10,000-RM30,000.

The memorandum last Friday was submitted by its president Khairul Anuar Othman to Azman Abidin, who is the prime minister’s political secretary.

Its president Khairul Anuar Othman said the round of one-off withdrawals between RM10,000 to RM30,000 is a short-term solution so that the people will not run out of cash to spend.

He added that there are EPF contributors who owe banks, and some even need capital to start small businesses after losing their jobs.

However, Prime Minister Datuk Seri Anwar Ibrahim said the government would have to consider the plight and future of EPF contributors before they are allowed another round of special withdrawals. 

Anwar said it is better for the government to look for more effective options to help those impacted by or who had lost their source of income due to the Covid-19 pandemic. 

He added that this is because most contributors have very small savings, and if the government allows withdrawals again, it will affect contributors’ future. – The Vibes, January 18, 2023