EPF estimates that the minimum retirement savings needed after retirement is RM 240,000 that is based on the calculation of RM 1,000 per month for 20 years. Before covid, 67% of those registered with EPF did not even have that minimum. Further, again pre covid, EPF reported that 50% of contributors above the age of 54 have savings of below RM 50,000. Thus even before the pandemic, Malaysians were not saving enough for retirement mainly due to low incomes.
During the pandemic, through the i-Letsari, i-Sinar and i- Chitra schemes, EPF contributors were allowed to withdraw their savings to face the current economic challenges for themselves and for their family’s urgent needs. Most certainly it would be the poor and desperate who would seek to withdraw their future savings for current needs.
Recently, the EPF CEO stated that 6.3 million or 42% of the total membership have less than RM 10,000 in their Account 1, which is meant for retirement savings while 9.3 million people have less than RM 10,000 in Account 2, which could be used for such purposes as purchasing a house, medical bills or children’s education.
The savings in Account 1 is for retirement while the savings in Account 2 is for major financial needs such as for purchasing their first home or their children’s education or emergency needs such as their unexpected medical expenses.
Based on the withdrawals for the three schemes, Lestari, Sinar and Citra, it is highly probable that for many of the contributors, after their withdrawal from the various schemes, the savings remaining is almost gone. They would have nothing left for the needs of their families, such as education and housing needs or have enough for their retirement. Due to their urgent current emergency needs their future critical needs have had to be abandoned.
Is this the best way for the government to help those in need?
FOMCA strongly believes that adequate financial support should have been given directly to those in need. Forcing people to use their own future emergency and retirement saving to face the current crises is grossly unfair for the future wellbeing of the rakyat. The most badly affected would certainly be the poor and the vulnerable.
If workers and consumers are forced to use their own savings to rescue themselves from the current crises, it clearly indicates how grossly inadequate the current social protection programmes are. And this does not even include the hawkers and contract workers outside the EPF system who have completely no social protection.
The current approach of using EPF savings for current emergency needs will definitely cause severe suffering as workers face spike in healthcare costs and very low saving to face their retirement years.
FOMCA urges the government to provide sufficient financial assistance, especially to those who have lost their jobs or have had their incomes reduced to sustain a minimum standard of living, not just by a one-off low payment but through a sustained financial support until they get out of the economic disaster.
The increasing suicide rates indicate clearly that many consumers feel that they have no financial or emotional support to face the current crises. The social protection scheme and the assistance to families to face the current crises clearly is grossly inadequate.
FOMCA strongly supports the need for financial planning and financial management of all consumers. Thus we have continuously emphasised the need for financial literacy programmes. The current scenario of using retirement savings for current urgent needs would have a devastating impact on the future financial needs of the rakyat.
There is an urgent need to reform our social protection and financial assistance schemes for the vulnerable members of society to ensure that they have access to at least a minimum standard of living even during a crises.
Forcing the poor to use their future savings to face a current crises reflects a broken social protection system.
