Future-proofing family finances

PARENTS who worry that their grown-up children would not be able to afford to buy houses or those who do not want their children to be saddled with student debt can offer them a financial hand via the groundbreaking Employees Provident Fund (EPF) inter-generational wealth transfer, according to an economist.

Prof Emeritus Barjoyai Bardai said this scheme allows parents to plan ahead by transferring part of their retirement savings directly to their children.

This will give the children a financial head start and reduce reliance on loans.

“This scheme could significantly lessen the financial strain on the next generation, freeing them from burdens like mortgages and student loans,” Barjoyai said when contacted.

“This is not just about passing down wealth, but creating a financial buffer for the next generation.

“With this system, parents can secure their children’s future, from education to home ownership, without relying on loans. It could significantly lessen the need for external financial products, freeing them from the shackles of debt.”

He said the scheme would also foster better financial planning across generations, encouraging families to think strategically about long-term wealth.

“We are shifting the narrative of pension funds from being solely about the individual to future-proofing entire families.

“Families could start planning as early as their children’s birth, ensuring a strong financial foundation for milestones like marriage or business ventures.”

As Malaysia moves towards the liberalisation of financial planning, he said schemes like these could reduce the government’s role in enforcing compulsory pension contributions.

“As we move forward, the government could gradually scale back its role, with individuals taking greater responsibility for their financial future,” Barjoyai said.

He also suggested that the scheme be extended into a “wakaf” model, allowing a portion of the EPF savings to be transferred into charitable funds after the contributor’s death, ensuring continuous good deeds for the deceased.

He suggested that EPF introduce advisory services to help members calculate how much they need to save for the next 10 or 20 years, providing a clear path for future financial stability.

Prime Minister Datuk Seri Anwar Ibrahim in his Budget 2025 speech yesterday outlined this scheme as part of broader efforts to enhance social protection in Malaysia.

He said the EPF is reviewing its schemes to allow for intergenerational transfers, ensuring financial security for families as the nation prepares for an ageing population.