LETTERS: Back in the first phase of the MCO, the Government introduced i-Lestari – retirement fund withdrawal from account 2 to increase liquidity and cash flow of households.

Prior to this, Employees Provident Fund (EPF) withdrawal was not an option unless one has reached the age of 50 or other reasons that would generate future economic benefits as outlined by EPF to withdraw the amount in Account 2 and 55 years old for Account 1.

When i-Lestari was discontinued, i-Sinar was announced and EPF members were allowed to withdraw from Account 1. The introduction of i-Lestari withdrawal facility during the MCO 1.0 acted as a supplement to assist survivability on daily needs.

Restrictions were imposed for i-Lestari where the source of withdrawal would come from Account 2. However, during MCO 1.0, cash assistance was also being handed out to Malaysians, eligible to individuals below a certain level of income threshold. 

In the i-Sinar facility, no restrictions were levied by the government to withdraw money from their retirement savings. Additionally, meagre cash handouts were given and the income threshold eligibility was lowered.

These policies are deemed to be unsustainable for the future as the latest statement by the CEO of EPF revealed that out of 15 million members, 6.3 million people have retirement savings of below RM 10,000 in Account 1.

Albeit the current vaccination rollouts ongoing, the number of Covid-19 cases are still sky high. To achieve the threshold of lower than 4,000 daily cases to pass Phase 1 of the National Recovery Plan is a long way ahead.

Thus, a longer MCO period is expected to be forced upon the people. In the recent PEMULIH, i-Citra is established where a total of RM 5,000 is permitted to be withdrawn over a period of 5 months.

The economy would still be on the trough of economic cycle and the light at the end of the tunnel is still far from sight. Hence, to compensate the lack of retirement savings due to massive EPF withdrawals will sound like a pipe dream.

Having no retirement or too little amount by the time EPF members reach retirement age would change the pattern of the future.

If now, early retirement is a dream. In the future, the occurrence of retirement per se would be merely a daydream that only a small portion of people could achieve as retirement will no longer be affordable.

Labour market will transform as older populations will remain in the labour force due to inadequate reserves to fund retirements. The Department of Statistics Malaysia (DOSM) projected that Malaysia will reach ageing nation status by 2040.

The ageing nation status also brings in the fact that elderly dependency ratio will be on upward trends. Spike in healthcare costs and deficient social security net will be a challenge in the future.

Fiscal deterioration would be like rubbing salt to the wound as tax revenue from income taxes will no longer be a sustainable option as population becomes older.

The pandemic brings economic scarring that will hold Malaysia to lag in terms of economic growth. In addition, lower social security net available at old age will deteriorate and amplify the economic ailments even further.

Evidently, policy makers are short-sighted in defining solutions for the current economic slowdown and the future will no longer be foreseeable due to the uncertainties that arise from the policies crafted.

NOR ZAINAL ABIDIN

The University of Manchester 

https://www.nst.com.my/opinion/letters/2021/06/703340/epf-withdrawals-will-affect-future-retirement