PUTRAJAYA: Allowing workers to withdraw from the Employees Provident Fund (EPF) to tide over the economic impact of Covid-19 will deplete their savings but may help with the economy, say experts.
They said this after the Prime Minister announced that the government is studying suggestions to allow certain contributors such as laid-off workers to withdraw funds from Account 1 of the EPF.
“I have discussed with the Finance Ministry and we basically agreed and are prepared to study the proposal for contributors who really need to withdraw allocations from Account 1,” Prime Minister Tan Sri Muhyiddin Yassin said here yesterday.
The government has already relaxed the rules twice this year by lowering the EPF contribution by workers from 11% to 7% and allowing i-Lestari withdrawal of RM6,000 from Account 2.
Almost 70% of EPF members had opted to reduce their contribution to 7%, increasing the total disposable income to almost RM700mil per month, he said in an interview with Bernama and local television stations ahead of Budget 2021 tomorrow.
However, as more than 30% of EPF members have less than RM5,000 in their accounts, this may not help address the cash flow problems faced by contributors.
“(There are) some who have contributions of less than RM1,000. Hence, EPF savings will not necessarily be able to address their cash flow problem.
“If they draw down then they won’t have any savings for their future,” he said.
Account 1, meant for retirement, makes up 70% of a worker’s EPF savings.
“However, the government is always ready to study the proposal to help the rakyat who are facing difficulties and truly need (the funds),” he said.
A responsible government must balance the short-term needs of the affected individuals with their long-term future and requirements of retirement savings, he added.
As to the call by several parties to extend the loan moratorium, Muhyiddin said the government had discussed the matter with Bank Negara Malaysia and the Association of Banks in Malaysia.
“The government has received many responses on the need to extend the moratorium, especially for those affected,” he said.
The government will examine the approach to facilitate the process for those who really need support, he added.
Consumer Association of Penang president Mohideen Abdul Kader said many Malaysians are living without savings and their monies should be kept in EPF for retirement.
“If the withdrawals are allowed then there will be poorer people in Malaysia. People have to learn to live a simple lifestyle,” he said.
Mohideen said CAP has evidence that those who withdrew their funds from EPF often finished spending it in a few years.
“So, let the money be kept in EPF. It is the poor people’s bank,” he said.
Mohideen proposed that the government instead extend the moratorium and provide loans to those in need.
“We should not create more beggars” but rather people who can fend for themselves, he said.
Meanwhile, Malaysian Trades Union Congress deputy president Mohd Effendy Abdul Ghani welcomed the government’s move to review the proposal to withdraw from Account 1 of the EPF.
“I think that’s the right way to boost our economy. Because when people have money to spend, they will help boost the economy internally,” he said.
However, he wanted the government to conduct more studies before deciding on the limit for the withdrawal.
Source: the star