‘Govt needs to help those with less than RM1,000’

PETALING JAYA: More efforts are needed to help Employees Provident Fund (EPF) contributors who have less than RM1,000 in their accounts to increase their retirement savings.

Economist Prof Dr Barjoyai Bardai said the government’s decision to allow further withdrawal from EPF could, in the long run, increase the number of contributors who have less than RM1,000 in their accounts.

“The government has made the right decision because the EPF Act was amended in 2019 to allow for withdrawals, so it means that the government cannot disallow it. But at the same time they also need to think about the workers’ well-being when they retire.

“With this withdrawal, we will have 6.1 million contributors with less than RM10,000 and 3.6 million with less than RM1,000 in their accounts.

“This is a serious matter as these people would probably have to work until they die,” he said.

The government, he said, should help especially those with less than RM1,000 in their accounts to prepare for their retirement.

“Maybe they can provide a temporary loan for them to invest in their EPF. Let’s say the government allows them to loan RM100,000, the interest for the loan is two per cent, EPF will invest the money and if they get six per cent profit, the contributors will benefit from the four per cent or RM4,000 every year.

“Then with the compounding interest, EPF contributors will get quite a higher sum when they retire and they can use the money to set up a small business or go into farming.

“The RM100,000 will be returned to the government once they retire,” he said.

Barjoyai said about two million contributors are expected to withdraw RM10,000 from EPF and this would indirectly help spur our economy.

“Those who can withdraw their money would be relieved as it helps lessen their financial burden. When they spend the money, it will give a multiplier effect to the economy.

“Let’s say RM20bil is spent, it will encourage production, meaning demand for suppliers will increase, so in a way, it will create a multiplier effect that will indirectly boost the economy,” he said.

Barjoyai said EPF would have to sell bonds, sukuk or shares for cash liquidity.

“RM20bil (from two million contributors) is not a huge sum so I believe it would not affect the stock market and bond prices,” he added.

Consumer financial expert Prof Dr Mohamad Fazli Sabri said even though the decision to allow for another withdrawal was a tough one, it is something that needed to be done to help ease the financial pressure faced by the people.

He said the move would also prevent those with no other source of income from being victims of loan sharks or scammers.

“I think the decision made by the government will benefit the public. It was not an easy decision as it affects the contributors’ retirement savings and studies have shown that the public need between RM500,000 and RM1mil when they retire.

“We had a discussion with the B40 community in Perak, Melaka, Terengganu and the study shows that these people don’t have any other source of income and some of them are so desperate that they get involved in get rich schemes (skim cepat kaya) in hope that they can earn fast money,” he said.

Economist Datuk Jalilah Baba said the announcement to allow the RM10,000 withdrawal from EPF showed the government is concerned about the plight of the people.

“The move is good, especially for those who need money urgently to reduce their financial burden.

“I hope they will make use of the RM10,000 well and not spend on unnecessary things as this will defeat the purpose,” said the former Malaysian Investment Development Authority director-general.