Kuala Lumpur, 6 January 2022 – Bait Al-Amanah strongly supports the government’s decision not to allow further withdrawals from the Employees Provident Fund (EPF). We agree with the need to prioritize long-term security over short-term populist measures.
We understand the urgency to alleviate the financial burden of vulnerable groups as a result of the floods and the ongoing pandemic, but additional retirement fund withdrawals as proposed by several politicians is certainly not the right step forward.
From the onset, EPF’s vision and mission is to help members achieve a better future through continuous improvement in safeguarding members’ savings and delivering excellent services. Hence, calls for repeated withdrawals do not align with the raison d’être of the retirement scheme. As evidence, there is no provision in EPF Act 1991 that permits withdrawals under natural disasters. Instead, the act clearly states that Account 1 is meant for retirement, while Account 2 is designated for discretionary withdrawals aimed at securing a better retirement in the future.
Repeated withdrawals will only lead to shrinking capital, jeopardizing the ability of EPF to generate income and better dividends for a brighter future. In a nutshell, we need to reinforce EPF’s position as a trustworthy provident fund and dependable trustee to members’ retirement future.
Worryingly, the i-Lestari, i-Sinar, and i-Citra withdrawals have inevitably led to 6.1 million EPF members having less than RM10,000 in their accounts, whereby a substantial 3.6 million have less than RM1,000. Furthermore, the savings of the bottom 40% of EPF members fell by 38% to just RM8bil, which renders a median savings balance of only RM1,005.
As such, many of the most vulnerable might be disqualified from making another round of withdrawals, considering their account balance. Even if their applications were approved, another withdrawal will result in the loss of annual and compounded dividends in the long run, further depleting the long-term savings of the most vulnerable from low-income communities.
Besides that, many Malaysians who do not have active EPF accounts will not be able to benefit from a repeated withdrawal scheme.
Instead, we call upon the government to proactively expand the various forms of financial aid to individuals and businesses to recover from the floods in the immediate term, instead of caving into the demands for Malaysians to dip into their retirement funds.
In the long term, we need to reevaluate and reform the coverage of social protection measures for communities across Malaysia to effectively address vulnerability to poverty.
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