The Prime Minister and Finance Minister are under fire for rejecting calls from certain quarters to release EPF withdrawals under the i-citra program for victims in the recent flood disaster.
Both are under attack on social media with brickbats from both divisions of the political spectrum, however, Prime Minister Datuk Seri Ismail Sabri has brushed off the attacks and said that he is sticking to the decision. It is also worth noting that the strong calls are coming from a particular Political Party representative.
While sympathising with the victims, the government has allocated close to RM1 billion in aid and assistance including long-term solutions to avert such catastrophes. To date a total of RM61,000 in been dispersed per household, they are RM1000 from the Personal Financial Assistance Fund, RM10,000 for injuries and next of kin for death, RM2500 in essential goods, RM5000 to RM56,000 for repair work of homes, 100% rebate on the electricity bill, rebate on the water bill, discounts of vehicle repairs and RM1000 rebate for workshop fees.
It is also worth noting that the funds were distributed pretty fast with some of the affected being caught by surprise by the speed. dmitting this is the first time they recall such quick assistance from the government. With more aid and assistance guaranteed it’s disturbing to hear irresponsible calls from ‘glory seeking’ politicians to ask the retirement savings body once again to unlock its vaults to allow people to take out their Sunset Day Financial Support Safety Net.
EPF states that the devastating Covid-19 impact and the permission in allowing Malaysians to withdraw from the savings under the i-Citra program have left many individuals with a bleak future. With the savings depleted, the body is committed to helping the members rebuild their retirement income to ensure their retirement future would not be further compromised.
It further added that the roll-out of i-Lestari and i-Sinar withdrawals in 2020, followed by i-Citra in July 2021, had been exceptional in nature as these initiatives were extended to meet the urgent cash flow needs of members during the periods of the Movement Control Orders (MCO) and the subsequent economic slowdown. As of October 2021, a total of RM101 billion has been withdrawn under the three withdrawal schemes. This is equivalent to 22% of the total RM530 billion of the government stimulus program as support for Malaysians as a whole. While the withdrawal initiatives provided some financial relief to members during the pandemic and various MCOs, the withdrawals have inevitably led to 6.1 million members now having less than RM10,000 in their EPF accounts, of which 3.6 million have less than RM1,000, levels at which members are not able to guarantee their retirement.
A sobering fact is that the majority of those who have made emergency withdrawals from the EPF were Bumiputera members. As a result of the withdrawals, 4.4 million or 54% of Bumiputera members now have less than RM10,000, and 2.0 million or 25% have less than RM1,000. This is particularly worrying as the numbers show the increasing percentage of members not meeting the EPF Basic Savings threshold of RM240,000 which is the minimum amount members should have when they reach age 55 in order to have a decent retirement.
But the EPF represents all Malaysians and their savings, if the body is anyway compromised the impact could be catastrophic, as it functions in a complex financial landscape with international and domestic investment, it’s a trusted entity with high global ratings. Any implication to its status could erode investor confidence and affect all investment portfolios it supports, which means large corporations and GLC’s will be shaken if the country’s largest pension fund has a problem.
This will not only affect Malaysia but also members in terms of their annual dividend and trust for the body, this could trigger other spillovers and lead to mass withdrawals further exacerbating the situation.
As trustee, EPF added that it has a fiduciary duty to uphold the equitable interest of all its members, more so when there are still millions of members who maintain their savings untouched and hope for better returns that would see them through their golden years.
Currently, there are more than RM270 billion EPF savings that can be withdrawn at any time by EPF members who have reached above age 55 or 60, or those who have more than RM1 million in their EPF account. It is feared that such erosion of trust towards the EPF may force these members to withdraw en masse, thus causing a negative impact to the country’s markets as the EPF is a major pillar in the holding of capital market and financial investment assets in the country.
Addressing old-age income security remains EPF’s prime mandate and guiding principle in the development of the retirement fund’s systemic and actionable aged care strategy. Malaysia is just nine years short of becoming an aged nation in 2030. The number of aged persons who are in need of the Government’s assistance is expected to increase at a rapid rate from 3.5 million in 2021 to 5.3 million, or 15% of the population by 2030, and 7.4 million, or 21% of the population in 2042, raising policy challenges in areas such as employment, income security, and health care. This underscores the importance of having adequate savings and income for future security as well as to withstand any future financial shocks.
So, let keep EPF sacred and protect its sanctity, this should be a last resort when all else fails. For now, the Government has tools to fix the situation in the flood-hit states, let’s just see that through. In the meantime, Malaysians have come together to help and we can continue to give this support.
