KUALA LUMPUR: The boost from a new Employees Provident Fund (EPF) withdrawal scheme to sales of retailers will likely be subdued this time compared to the last similar initiative (Pengeluaran Khas scheme) in April 2022.

Analysts said if all EPF members choose to opt for a one-off transfer from Account 2 to the Account 3, an estimated RM57 billion could be transferred to the new flexible account.

Of this, only about RM25 billion may flow out from Account 3 in the first year, based on patterns from pandemic-related withdrawal schemes, versus the Pengeluaran Khas scheme's total of RM44.6 billion, before moderating to RM4.0 billion-RM5.0 billion annually thereafter.

The EPF will revamp the structure of Account 1 and 2 for members aged below 55 into three accounts effective from May 11.

The three accounts are Akaun Persaraan for retirement (Account 1), Akaun Sejahtera for pre-retirement lifecycle needs such as housing, education and medical (Account 2) and Akaun Fleksibel for short-term financial needs (Account 3).

New mandatory and voluntary contributions will be apportioned at a ratio of 75:15:10 for Account 1, Account 2 and Account 3 respectively.

Members may also opt to move funds from Account 3 into the more restrictive accounts or from Account 2 to Account 1, but not the other way round.

For members over 55, savings in all three accounts will be merged into Akaun 55, and new contributions will be credited to Akaun Emas.

Analysts at Kenanga Research expect minimal impact on consumer discretionary and automotive sectors from the latest withdrawal scheme.

"Assuming a blue-sky scenario where every EPF member opts into Akaun Fleksibel and withdraws RM25 billion in the first year, the economic impact would still only be about half of that seen with Pengeluaran Khas," the firm said.

Considering the average EPF savings as of Dec 31 2023 of RM1,700 for B40 and RM28,000 for M40, the projected transfers to Akaun Fleksibel would range between RM1,000 and RM3,000.

Therefore, the launch of Akaun Fleksibel is unlikely to significantly affect consumer discretionary sectors including the automotive industry, which showed stable sales and backlog figures (200,000-250,000 units) during the special withdrawal period of April-May 2022, Kenanga Research said.

The firm said the initial three EPF withdrawal schemes namely i-Lestari, i-Sinar and i-Citra were implemented to address urgent cash flow needs during Malaysia's movement control orders and the economic downturn caused by Covid-19, making them incomparable to later schemes.

"The subsequent Pengeluaran Khas scheme in April 2022, allowing withdrawals of up to RM10,000, is a more apt comparison as it occurred during the economic recovery phase post-pandemic.

"This scheme attracted 6.6 million applications and facilitated the withdrawal of RM44.6 billion. Major consumer discretionary firms like Padini, Aeon, Parkson and Metrojaya experienced a significant sales boost in the second quarter of 2022 following this scheme."

Kenanga Research added that sales, however, had declined markedly in subsequent quarters, indicating that the impact was shortlived.

Monthly vehicle sales did not rise but actually fell in April and May 2022 after the introduction of the withdrawal scheme.

CIMB Research said the EPF expects no impact to its portfolio, although caveating that holding liquid assets have a trade-off against returns.

The firm added that the outflow from Account 3 may overlap with the regular run rate of conditional Account 2 withdrawals, thereby moderating gross withdrawals.

"Withdrawals for emergency needs tend to be more urgent for B40 and M40 members, which hold RM11 billion and RM180 billion  in total savings respectively.

"However, EPF previously estimated in 2021 that 60 per cent of members had exhausted Account 2 balances due to Covid-19 schemes, suggesting that potential outflows could be moderated if the T20 segment are motivated to keep savings by the retention of a uniform dividend rate across all accounts for the time being," the firm noted.

Menawhile, CIMB Research said the outflow from Account 3 will affect the demand for Malaysia Government Securities (MGS) and Government Investment Issue (GII) in the near term.

This, however, will be mitigated by strong net contributions, ample onshore liquidity and repatriation by government-linked companies and government-linked investment companies.

The firm said persistently strong net contributions and asset under management growth amid robust labour markets and wage growth will cushion the impact to MGS/GII.

"It is also supported by upside to EPF contributions arising from the shift of new civil servants into a defined contribution retirement plan, strong onshore liquidity as seen in auction over-subscriptions and GLC/GLIC/corporate repatriation and conversion of foreign investment income or export proceeds," it added.

https://www.nst.com.my/business/corporate/2024/04/1043194/no-splurge-spending-latest-epf-withdrawal-scheme