EPF as collateral will only worsen debts, says Dr Wee

USING their Employees Provident Fund (EPF) savings as collateral for bank loans is only likely to worsen the financial situation of the borrowers, said Datuk Seri Dr Wee Ka Siong.

This will bring more problems because the accumulated interest will be higher than the (average) fixed deposit rate of about 4%, said Dr Wee (BN-Ayer Hitam).

This, he said, may be against the objective of the retirement fund itself, which is to protect Malaysians in their golden years.

“This will cause the savings of borrowers – who are unable to service their loans – to be depleted.

“This may go against the EPF’s original objective and the EPF Act, which is to protect Malaysians who will retire tomorrow,” he said during his winding-up speech on Budget 2023 at the committee stage in Parliament yesterday.

Dr Wee then asked the government when the proposal would be implemented, as amendments would be needed to allow EPF savings to be used as collateral.

“How long until we can allow Malaysians to do what was announced by the Prime Minister?” he said.

During the policy stage ministerial winding-up session in Parliament last Thursday, Anwar announced that the government would introduce a new scheme where contributors in dire financial straits could take up bank loans using their EPF savings as collateral.

Dr Wee also said the proposal to credit RM500 into the accounts of those aged between 40 and 54 with less than RM10,000 in their EPF Account 1 may cause discontent among other active EPF contributors. As an example, he said, inactive members may benefit from the initiative.

“Active contributors may then feel that they are not taken care of despite making regular contributions,” he added, urging the Finance Ministry to reveal how many active members would benefit from the initiative.

In Budget 2023, it was announced that EPF members who meet the criteria would have RM500 credited into their accounts.

EPF has said that two million members aged between 40 and 54 have less than RM10,000 in savings. It also said 2.64 million members in that age group were inactive and did not make contributions over the last few years.