EPF: Is it a Retirement or “Emergency” Fund?

The Employees Provident Fund (EPF) will open applications for a new round of special withdrawals from April 1 to April 30. In a statement, it said members aged below 55 years old will be eligible to apply, with payments starting April 20.

A maximum withdrawal amount of RM10,000 and minimum RM50 and this must fully utilise their savings balance in Account 2 first before accessing their Account 1. Over 6.3 million people will qualify.

This is the fourth special withdrawal scheme since 2020. Over RM101 billion has been withdrawn from the previous three schemes. Pakatan Harapan had also urged Putrajaya to allow more withdrawals.

Source: https://ms.wikipedia.org

A maximum of RM63 billion can be withdrawn and this will force EPF to sell off some of its assets. EPF’s dividend for conventional savings for 2021 could have reached 6.7 percent, but only 6.1 percent was declared due to the earlier withdrawals. This means RM5.4 billion in terms of the additional dividend could have been distributed to all EPF members if those withdrawals had not been made. The “loss” of RM5.4 billion from the dividend has caused about 5.3 million members, who had not withdrawn their savings ever are forced to accept lower returns on their savings. Is this fair?

Last week, in pushing for another iCitra EPF withdrawal of RM10,000, Najib Razak proposed the fund introduce a multi-tiered dividend payout, among others.

This means that those with lower savings get a higher percentage while those with higher savings will get a lower percentage. Those with higher savings are already paying higher taxes  - is this fair?

The Director of the Institute of Malaysian and International Studies at Universiti Kebangsaan Malaysia, Sufian Jusoh, who specialises in development economics said the government would be seen as unfair for putting the burden on this group of Malaysians.

Why can’t the Minister of Finance provide a term loan through EPF against the EPF savings in accounts 1 and 2? Basic features are as follows:

        Short-term Loan : 100% of amount in Accounts 1 and 2

        Security                 : A charge on Accounts 1 and 2 (for those who borrow)

        Interest rate         : 0%

        Repayment         :10 years, by way of dividends declared by EPF

For EPF, the Government will pay an interest of 2% p.a. on the facility. (If you can do MRT3 for RM50 billion, you can pay the interest).

In the above manner, the B40 or M40 will get their emergency fund and still retain their savings. In addition, the repayment is from future dividends.

For EPF, it does not have to dispose any of its assets but extend a new loan scheme (new asset) for qualified and needy members. There is no liquidity “crunch” on its cash flow. Interest is set at 2% p.a. because that’s the minimum EPF (Act) promises to pay contributors.

For the Government, it is only interest over 10 years and not the “principal”.

Pray tell me why this cannot be done? Instead of “hair-brained” schemes from Najib Razak who has cash of USD756 million (from 1MDB). And Najib please use your cash as third party pledge? After all isn’t it all from Rakyat Malaysia?

References:

Putrajaya allows another round of EPF withdrawals, Malaysiakini, March 16, 2022

Multi-tiered EPF dividends will see exodus of funds, warns experts, K. Parkaran, FreeMalaysiaToday (FMT), March 16, 2022