SHAH ALAM: The Employees Provident Fund (EPF) withdrawals, amounting to RM145.5bil since 2020, are larger than the individual gross domestic product (GDP) of some 100 countries, says Datuk Seri Amir Hamzah Azizan.
And because of this, the pension fund cannot allow anymore withdrawals.
“That is how much has been taken out,” the EPF chief executive officer said during a presentation of the fund’s 2022 financial performance report yesterday.
He noted that bumiputra and Indian members, below age 55, saw a higher erosion of savings due to the multiple pandemic-related withdrawals.
As of April 2020, the median savings of bumiputra members were at RM15,500 but that had shrunk to RM4,900 as of December 2022.
“The basic savings have been reduced by 70% because of the withdrawals,” he said, while highlighting the prevalence of withdrawals in the community.
The Indian community saw about a 40% drop in median savings – from RM25,700 to RM14,900.
Chinese Malaysians, on the other hand, only saw a 1% drop – from RM45,800 to RM45,200.
“The Chinese community has been pretty well grounded,” he said.
“We cannot allow anymore withdrawals because the base now has got too low for some groups.”
As for income groups, the Top 20 (T20) group, which has 2.6 million members, saw a 9% increase in median savings – from RM140,440 as of April 2020 to RM152,964 as of December 2022.
The median savings of the Middle 40 (M40) shrank by 34% from RM30,113 to RM19,926.
The median savings of the Bottom 40 (B40) dropped by 76% to RM577 – from RM2,434.
There are 5.2 million members in the M40 and B40 groups.
Amir noted that the inadequate retirement savings remains a challenge as only 19%, or 2.5 million members, had achieved the minimum basic savings threshold of RM240,000 by the age of 55.
“The scary thing for EPF is actually the numbers.
“Only 19% of our active members today have reached the threshold that we have set for basic savings.
“We need to do better, the country needs to better. The country needs to focus in terms of addressing a potential retirement crisis.
“The withdrawals have not helped,” added Amir.
In addition, only 3%, or 350,000 members, had achieved the adequate savings threshold of RM600,000.
As life expectancy has increased, he said it is important to ensure that the savings are higher.
He noted that members aged between 30 and 50 have a higher probability of achieving the basic savings threshold.
A total of RM44.6bil was taken out through a special withdrawal scheme last year.
“Liquidity, despite the RM145bil going out, still remains intact.
“We have been doing quite a lot of liquidity management over the years and that allowed us to manage through the withdrawals, including the RM44.6bil special withdrawal in April last year,” he said.
“That was not a small sum. It was a challenge but we managed it.”
The total contribution for 2022 was RM87.8bil whereas total withdrawal was RM91bil.
Citing an example of the consequences of the special withdrawals, Amir said the amount could have been invested to generate higher returns for members.
“I think we managed to generate a reasonable income for our members,” he said, adding that the returns could have been better without the special withdrawals.
For 2022, the EPF declared a dividend rate of 5.35% for conventional savings, with a total payout of RM45.44bil, and a 4.75% dividend rate for syariah savings, with a payout amounting to RM5.7bil.
In total, the retirement fund’s payout for 2022 amounts to RM51.14bil.
