Are EPF Withdrawals A Solution?

In recent weeks, many affected by the floods have been appealing to the Government for withdrawal of RM10,000 in their EPF accounts. Earlier, the Government offered to support with RM1,000 cash grant for those affected.

When you lose household items and lives is RM1,000 enough? No! That’s why people are asking for withdrawal of their own money to start afresh. But that will affect funds available for retirement. To date a total of RM101 billion has been withdrawn under 3 special withdrawal schemes.

Source: https://ms.wikipedia.org

Those requesting for further withdrawals are Bumiputeras (74%), and 79% have savings less than RM10,000. The MOF is of the view that the government has channelled assistance amounting to RM10 billion through Bantuan Prihatin Rakyat (BPR), Covid-19 Special Assistance (BKC) and also Income Loss Assistance (BKP) which benefited some 11 million recipients.

According to MOF, the purpose of the EPF is none other than to prepare for one's old age. In just eight years, retirees and the elderly will make up 15 per cent or more than 5.3 million of the country's population.  This means they will need more savings to finance their living after retirement.

But meanwhile, how will they start afresh? Look for Ah Longs? Banks? Family?

The Government could do a couple of things:

• Raise the retirement age to 65;
• Issue a bond subscribed by high net worth individuals or those with savings of more than RM0.5 million with EPF. The money secured is loaned interest free to the B40 group. Coupon of 5% is borne by the Government. Those who obtain the loan will need to pay back over 5 years (hence the retirement age is raised);
• Review pay scales and employer’s contribution to EPF;
• Seek support from PNB for those Bumiputeras who qualify under the interest-free loan, i.e. the ASB/ASB dividend stream could be assigned for repayment of the loan; 
• Use the reverse mortgage with Cagamas for those who qualify; and
• Work out a new scheme for retirement including review funds “stuck” at Socso.

There are many other ways to solve this – if you have compassion!

Reference:

EPF withdrawal not the solution to tough situations, Rafidah Mat Ruzki, 2/1/2022

https://www.nst.com.my