EPF: Proposal to formalise monthly drawdown instead of lump-sum still being studied

PETALING JAYA: The proposal to formalise a monthly drawdown mechanism for members is still being studied, says the Employees Provident Fund (EPF).

In a statement issued by its corporate affairs department, EPF said it would continue to take into account the ability and readiness of members to make such a transition.

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"The proposed changes will most likely require a generational change and the conversion will take time," said the EPF in a statement Thursday (July 6).

The EPF, however, believed that such a transition was necessary given the average life expectancy has increased from 54 years old in 1957 to 75 now, and was projected to further increase in the future, translating into longer years spent in retirement.

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"The EPF will continue to encourage its members to voluntarily convert to the monthly drawdown option," it added.

The monthly drawdown, explained EPF, was where a portion of the member’s savings, up to a certain limit, will be converted into a monthly income and the remaining portion can be withdrawn lump-sum, is needed to prevent old-age poverty and for consumption smoothing during retirement.

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"The EPF is taking a pragmatic and practical approach to the proposed policy enhancement, balancing the needs of current members against the desirability of sustaining members’ savings after retirement.

"The EPF will communicate any relevant changes to its policy to affected members well in advance of the changes taking effect," it noted.

The EPF, the statement said, has been working towards establishing a more pension-like approach towards providing members with a more stable income in their post-retirement years.

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"This can be seen from its current encouragement to members to voluntarily shift to regular monthly payouts rather than lump-sum withdrawals.

"In 2022, more than 7,000 members have already voluntarily adopted the monthly payout option," it added.

Earlier, Prime Minister Datuk Seri Anwar Ibrahim said that the government has no objections to the EPF's proposal to make it mandatory for new members to withdraw their savings periodically instead of a lump sum upon reaching 55 years old.

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In an online poll by The Star with nearly 1,500 respondents as at 8.30pm Thursday, more than 75% of voters did not agree with the proposal to impose such periodic withdrawals.

Many advocated for freedom of choice, and a good number of respondents were also of the opinion that such a move should not be made mandatory and instead be on a voluntary basis, with members being given the options of periodic, monthly or lump sum withdrawal.