Amidst the economic ravages caused by the Covid-19 pandemic, EPF has allowed an unprecedented withdrawal for all members for account 2. Although the measure was necessary, it also meant that many Malaysians will be going into their twilight years with less funds to see them through.
According to Prime Minister Datuk Seri Anwar Ibrahim, the number of EPF contributors below the age of 55 with savings less than RM10,000 had risen from 4.7 million people to 6.7 million, an increment of about 52%. As though that is not worrying enough, Anwar said Bumiputera contributors recorded the lowest median savings post-pandemic at about RM4,937 in December last year from RM15,541 in April 2020.
These statistics herald the retirement woes that lay just around the corner of Malaysia’s future. And when we thought Malaysians are done dipping into their retirement savings, Anwar comes up with a new announcement that elicited mixed reactions from Malaysians.
For those who are not privy to the details, funds from EPF account 2 can now be utilised as collateral for personal bank loans. The rationale was that the funds can only be used as collateral, and not to repay one’s loan until he or she has reached the retirement age of 50 or 55.
In our opinion, this is brilliant as it unlocks a huge amount of money for Malaysians to leverage and generate value for themselves. This is not the same as taking funds out of one’s retirement savings, in fact, far from it.
Malaysians who aspire to own a home can now tap into their savings to increase their housing loan approval rate. Not everyone wants to rent out for the rest of their lives. And what better legacy to leave behind for our children than by giving them a home upon our departure from this world?
Entrepreneurs who lack the funds to realise their business plans also stand a better chance to secure loans from the bank. In other words, this new policy could very well catalyse entrepreneurship in Malaysia.
If you have been diligently reading along, then you would have realised something interesting. We did not in any way advocate you using the funds as collateral to buy a Rolex, pay for your wedding or the new hybrid Proton X90.
The new policy comes with benefits, and also disadvantages. We could very well view it as a double-edged blade. The key takeaway here is to use this new perk to generate value for yourself.
However, the question remains if Malaysians are financially literate enough to capitalise on this golden opportunity, or will they succumb to their base desires?
