KUALA LUMPUR: The Employees Provident Fund (EPF) was never meant for calamities and pandemics but for a comfortable post-retirement for its contributors, says the Malaysian Institute of Economic Research (MIER).
Opposing calls to allow EPF members to withdraw more funds from their accounts, MIER said such withdrawals should be guided by sound economic reasoning.
“EPF is not designed to deal with calamities and pandemics. Rather, it is intended to ensure that its contributors enjoy a decent life after retirement.
“This is compounded by the fact that Malaysia is fast becoming an aging society. Malaysia is just nine 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,” it said in a statement today.
MIER said this in response to certain quarters that have been urging the government to allow a one-off i-Citra withdrawal of RM10,000 for contributors affected by the recent floods.
These calls followed a statement by finance minister Tengku Zafrul Aziz on Sunday that EPF should not be seen as a solution to overcome challenges, as it would affect the retirement savings of contributors.
In a report by Bernama, MIER said while government-initiated withdrawal schemes such as i-Lestari, i-Sinar and i-Citra have managed to provide financial relief, EPF withdrawals amounting to RM101 billion have resulted in a severe depletion of retirement funds for the majority of its members.
“The mass withdrawals have resulted in 6.1 million members now having less than RM10,000 in their accounts, with 3.6 million members having under RM1,000.
“This 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,” it said.
MIER said the previous three EPF withdrawal schemes were short-term measures which should have been avoided in the first place and must never be repeated.
“To address the short-term fiscal constraint Malaysians face, there is a strong economic justification for the government to provide sufficient unconditional cash assistance to households and firms,” it said.
Long-term measures, disaster relief fund imperative
MIER suggested that long-term measures were imperative to ensure that members have adequate savings for retirement, such as a readjustment of the employer’s EPF contribution rate without increasing the employers’ labour cost burden.
The government must also consider broader social protection and social safety net strategies, such as contingency plans and schemes that can kick-in in the face of calamities and other crises, it said.
“The recent past has taught us that we, as a nation, cannot be complacent since emergencies and other unexpected disasters can occur,” it said.
“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.”