Experts: Provide incentives to help boost EPF savings

Smart savings: The government could also provide various incentives to encourage those with low retirement funds save more.. — AZLINA ABDULLAH/ The Star

PETALING JAYA: Increase private sector workers’ salaries and provide incentives such as tax exemption to encourage Employees Provident Fund (EPF) members with low savings to work on rebuilding their retirement funds, experts say.

Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) SMEs committee chairman Koong Lin Loong said EPF contributors had a duty to ensure that they have enough for their retirement.

“They must be responsible for their own act, so they need to work harder, do two jobs to get back their savings because once you withdraw, your principal will be lower and EPF grows based on the dividends given based on the principal amount,” he said.

The government, he added, could also provide various incentives to encourage those with low retirement funds to put in more savings.

“We can provide incentives to, say, contributors with savings of less than RM10,000; if they save RM100, they will get an additional RM25, so they will have RM125 more for the principal.

“As for the M40 earners who are paying tax, perhaps the government can give extra tax incentives to encourage them to save and recoup their EPF savings,” he said.

Koong was addressing talk that there could be another round of EPF withdrawals, even though the government has not indicated so.

A total of RM145bil was withdrawn by EPF members under the four Covid-19-related programmes, namely i-Lestari (April 2020), i-Sinar (December 2020), i-Citra (July 2021) and a special withdrawal (March 2022).

Financial expert Prof Dr Mohamad Fazli Sabri said the public could opt for a private retirement scheme or other investment plans.

“They could increase their contributions if they could afford to or opt for a private retirement scheme, invest in gold or unit trust,” he said.

He said that at the same time, the government should beef up its outreach programme to improve the public’s financial awareness and literacy.

Former EPF chairman Tan Sri Samsudin Osman said with the current high expenditure, there wouldn’t be much left for employees in the private sector to save for their retirement.

“What they are getting is low and they have to survive the present days, so what else can they save?

“The private sector workers should be given a pay raise to help them save for their retirement,” he said.

The experts also feel that the government should not consider allowing another round of withdrawals.

ACCCIM’s Koong said the government should avoid giving another across-the-board approval for EPF withdrawal because the money was supposed to be the safety net for private sector employees, especially those in the B40 and M40 groups.

However, he said, EPF could possibly make an exception for people under two categories – those who were hit badly during the pandemic and those who lost their jobs.

He added that as Malaysia moved towards an ageing nation, if these people have low or no EPF savings, they would be a great burden to the government.

Deputy Finance Minister I Datuk Mohd Shahar Abdullah had said that as of June 30, 6.62 million members or 52% of the total of 12.78 million EPF members aged under 55 had savings of less than RM10,000.

About 3.2 million members under the age of 55 had savings of below RM1,000.

Koong warned of the possibility of seeing the 52% balloon to 60% should an “unnecessary” withdrawal be allowed.

“After you retire you still have 15 or 20 years to live, the minimum retirement savings as mentioned by EPF is RM240,000, meaning you have barely RM1,000 per month for 20 years.

“Today, the number is 52%, but I am sure it will go up to 60% or higher if we continue to allow withdrawals, politically driven or not, that are not based on necessity,” he said.

Prof Mohamad Fazli called on the government to conduct a study to see whether the past withdrawals had indeed been effective in helping the target groups brave the challenging economic situation.

Expressing worries of yet another round of withdrawals, he said: “When will this stop? Even a mountain will collapse if we keep on excavating.

“Look at the statistics, how many of us have less than RM1,000 or RM10,000 (in their EPF), how can they survive if there’s inflation at the time of their retirement?”

Like Koong, Prof Mohamad Fazli said the government needed to impose a more stringent criterion and allow only those in need to withdraw their retirement funds.

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