Prioritise savings for long-term benefits: There are currently two EPF accounts: Account 1 which cannot be accessed until retirement, and Account 2, where funds can be withdrawn for purposes such as education or payment for housing loans. — Filepic
PETALING JAYA: While some Malaysians welcome having flexible access to their Employees Provident Fund (EPF) accounts, financial experts are calling on the government to come up with a proper plan to ensure that retirement savings will not be compromised in the long run.
Sales manager Mohd Ikhwan Hanafi, 37, said the plan will allow contributors to withdraw a certain amount, yet their retirement fund will remain intact.
“The flexible account can be tapped into for emergency funds,” he said when asked for his opinion on the government’s move to introduce a new flexible account for EPF members that is accessible anytime.
The plan is part of Budget 2014 unveiled by the Prime Minister last Friday.
Currently, there are two accounts in EPF – Account 1 which cannot be accessed until retirement, and Account 2, where funds can be withdrawn for purposes such as education or payment for housing loans.
Kevin Fong, 33, who works in the IT sector, said that although it is a good idea, it is merely a short-term solution to address cash-flow issues for the people.
“If someone is in desperate need of money, it is all right for them to withdraw their own money. But we must think long-term – is this a sustainable move?” he said.
V. Latha, 36, an employee in the corporate sector, has her reservations.
“I feel the government must think through the plan before implementing it. Some Malaysians can be spendthrifts and may want to withdraw their retirement funds unnecessarily,” she said.
Malaysia University of Science and Technology economics professor Geoffrey Williams said EPF was very heavily affected by the withdrawals allowed to ease the people’s financial woes due to the Covid-19 pandemic.
“Although the overall fund remains above RM1 trillion, it is RM155bil lower than it could have been, and although the dividend remained very strong, fewer members benefited because they had depleted their accounts.
“So, there are now millions of members without savings, and for those with savings, the amounts are not enough to support a decent pension,” he said.
The challenge, said Prof Williams, is to increase members’ savings.
“To do this, I believe EPF is developing a wider financial service offering to make membership more attractive and encourage savings.
“Restructuring the accounts is an important part of this to allow a new flexible savings account to complement the long-term Accounts 1 and 2,” he said.
Bank Muamalat Malaysia chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said it will be a delicate balancing act for the government.
“In that sense, we need to empower the rakyat with financial literacy so that they will make informed and wise decisions whenever they decide to withdraw their EPF savings.
“Ideally, savings in EPF shouldn’t be touched because we need to aim for savings adequacy among the members. But I suppose the situation warrants a flexible approach in dealing with the problem,” he added.
Centre for Market Education chief executive officer Dr Carmelo Ferlito believes the move could backfire, putting a patch on short-term troubles but creating bigger holes in the long run.
It would be better, he said, to have “special cases” for withdrawals and at the same time enhance financial literacy among the people.
Another long-term strategy to consider is ways to improve incomes and savings, said Ferlito.
“For example, the government does whatever it takes to create an ecosystem that is conducive to private investments, also favouring big-scale operations, which are the best means to creating long-term sustainable growth that benefits everybody,” he added.
