The announcement by the Prime Minister allowing for special EPF withdrawal of RM10,000 is likely to bolster consumer expenditure which would bode well for the economy in the short-term but can fuel a retirement crisis in the future, an economist said.
Socio-Economic Research Centre (SERC) Lee Heng Guie said that at time when consumer demand is low, it would be helpful to consumers and the economy but it can lead to a crisis in the future when many would not have enough savings for their old age.
“Already up to 46% members of the Employees Provident Fund (EPF) below the age of 55 are having less than RM10,000 in their account, raising concerns on the sufficiency of their funds upon retirement. Further withdrawals can only exacerbate the old age crisis,” he said.
The EPF had stated previously that members’ basic savings threshold (RM240,000 at age 55) recorded a drop from 36% to 27% as a result of the Covid-19-related withdrawals to supplement their income during the crisis.
However in the immediate term, he said increased consumer spending can help bolster the economy and ca have a positive spiralling effect on the economy.
Prime Minister, Dato’ Sri Ismail Sabri bin Yaakob has made the special announcement that government allows special EPF withdrawal of RM10,000. Details of the withdrawal will be explained by the Ministry of Finance (MoF) and EPF.
In the brief announcement, the Prime Minister has also stressed that “he hopes contributors will consider carefully before making special EPF withdrawal of RM10,000.”
Two days ago, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said that the Employees Provident Fund (EPF) will have to dispose of more overseas investments, as well as halt domestic investments in the short to medium term if another RM10,000 withdrawal is to be allowed, which will have serious implications in the long-run.
He said a withdrawal of up to RM10,000 for 6.3 million eligible members will add up to a total of RM63 billion and will require the EPF to rebalance its portfolio to accommodate the withdrawal, which would likely drive the total impact beyond RM63 billion.
He was responding to calls from lawmakers to allow EPF members to make further withdrawals of up to RM10,000 to help tide them over in the current challenging environment. EPF members have previously been given access to up to RM71,000 of their pension funds via three special withdrawal programmes — namely i-Lestari, i-Sinar and i-Citra —which came up to RM101 billion.