PETALING JAYA: A proposal to allow Employees Provident Fund (EPF) contributors to dip into their savings again has come under heavy criticism.
An analyst and an economist said such a move would only raise inflation rather than solve an individual’s financial problems.
In addition, Bait Al-Amanah research director Benedict Weerasena told FMT Business, the EPF would be forced to re-balance its portfolio and sell assets prematurely, especially its investments abroad, to finance the additional cash outlay.
For Malaysian Institute of Economic Research (MIER) non-resident fellow Geoffrey Williams, it would also be futile given that many would already have exhausted their savings through previous withdrawals.
Weerasena and Williams were responding to a call by Pertubuhan Aktivis Rakyat Malaysia (ProRakyat) to allow another withdrawal of up to RM30,000 from the EPF.
Weerasena said another round of withdrawals could potentially worsen inflationary pressures, especially if this raised the amount of money circulating in the economy above the nation’s economic output.
“It would just give people a burst of higher spending power,” he said.
He said this was evident during the Covid-19 pandemic lockdowns when numerous stimulus packages, including at least four rounds of EPF withdrawals, were introduced, contributing to soaring inflation.
A fifth round of withdrawal will also exacerbate the challenge of shrinking capital and jeopardise the ability of the EPF to generate income and provide better dividends to contributors in the future.
As a result, he said, those who have never made any withdrawal under those schemes would have to settle for lower returns on their savings.
EPF has paid out more than RM145 billion since the first withdrawal was allowed in 2020 to help those who lost their jobs during the pandemic to meet their financial obligations.
Williams said another withdrawal would not benefit those in the low income groups because most would have exhausted their savings.
Another withdrawal of a similar quantum as the last would amount to RM45 billion, making it equally inflationary, he said.
“It would be equivalent to a stimulus of 3.5% of the gross domestic product (GDP) or 13.6% of government spending.”
Williams said interest rates would have to be raised to combat the resulting inflation, “which will make life harder for everyone”.
“While I sympathise with those who have lost their jobs during the lockdown, I believe they should be given other forms of aid and not forced to deplete their savings further.”
Data from the EPF shows that 73% of contributors do not even have enough in their savings to reach the sum of RM240,000 considered adequate for a poverty level pension by the time they retire.
A total of 96% are unlikely to have more than RM600,000 in their savings to ensure a decent income in retirement.
Williams said further withdrawals would only worsen the situation and contribute to the already “terrible” pension crisis affecting millions of Malaysians.
“The withdrawal schemes have been disastrous for the pensions system, showing that 65 years since independence, Malaysia still does not have an adequate social support system,” he said.