Economists have panned the call by former prime minister Najib Razak for the government to allow more withdrawals from the Employees Provident Fund (EPF) to help flood victims, saying among others that this might see contributors forced to continue working past their retirement age.
Ahmed Razman Abdul Latiff of Universiti Putra Malaysia said based on EPF figures, 6.1 million or 50% of those under 55 have savings of under RM10,000 for their retirement.
“If, for example, contributors withdraw RM6,000 under i-Lestari, RM10,000 under i-Sinar, and RM5,000 under i-Citra for a total of RM21,000, they will have to work four to five years past retirement age to make back the money they withdrew,” he said to MalaysiaNow.
“The issue of EPF members not having enough money for retirement is a very serious problem and it will become worse with each passing year as more and more stop working.”
Ahmed was referring to the various withdrawal programmes introduced over the past two years to cushion the impact of the Covid-19 pandemic.
Some RM101 billion has been withdrawn by EPF contributors so far through these three schemes.
The EPF recently warned that many members do not have enough savings to see them through their retirement years.
Finance Minister Tengku Zafrul Aziz meanwhile said EPF withdrawals were not the solution to the people’s financial woes.
He also said that such withdrawals would burden the generations to come.
Economist Muhammed Abdul Khalid said the situation came as no surprise as experts had already warned against withdrawing from the EPF in order to tackle the effects of Covid-19.
“Don’t allow the withdrawal of retirement funds to help those who have been affected by crisis,” he told MalaysiaNow.
“That is not a solution. It will only add to future problems,” he said, describing Najib’s call as “jadong” – an expression used by prominent thinker Syed Hussein Alatas which means evil, stupid and arrogant.
Troubles in old age
Muhammed also warned that the EPF and its contributors alike would have difficulty boosting their savings.
“Such irresponsible policies will have negative implications over the long term,” he added.
He said EPF data showed that one out of every two Malays has very little savings as it is and will end up below the poverty line upon retirement.
“The poor will be the people, not the narrow-minded leaders at the top,” he said.
Muhammed also said that any help should come from the government, and criticised Putrajaya’s claims of having insufficient funds to assist those affected by the Covid-19 crisis.
Economist Yeah Kim Leng meanwhile said there is a difference between retirement savings and savings for emergency purposes.
Yeah, who lectures at Sunway University, said the situation is exacerbated by the fact that many do not have emergency savings.
“Actually, in emergency situations like the current floods, the government should handle it by giving cash aid or soft loans so that retirement funds are not jeopardised and the people will not have to face a financial crisis when they retire,” he said.
Prime Minister Ismail Sabri Yaakob in his New Year’s address had announced additional aid for those affected by the massive floods which hit areas in several states, displacing tens of thousands.
Depending on their situation, flood victims are entitled to receive aid of up to RM61,000.
Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia, said the interest-free loans provided in addition to the cash aid could help ease the burdens of the flood victims.
He suggested that the government also step up attempts to help in other ways such as by gathering volunteer mechanics and centralising their efforts.
“The government could also work with NGOs to give more focused aid, prioritising basic assistance,” he told MalaysiaNow.
He added that the government should have no problem increasing its spending as it has the fiscal space to help the people.