Earlier this week, The Prime Minister announced that Malaysians below the age of 55 would be allowed to access their Employees Provident Fund (EPF) second account and will be allowed to withdraw a total of RM500 per month from their saving for 12 months in order to help ease the financial burdens that are hitting the nation in light of the COVID-19 outbreak earlier this month.
According to the Chief Executive Officer of the EPF, Tunku Alizakri Alias, the registration process will begin on April 1 via e-mail and postal methods.
The i-Lestari withdrawal facility will benefit up to 12 million contributors, with an estimated total withdrawal of RM40 billion.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said he believes the initiative will help boost private consumption, thus cushioning the impact of the pandemic on the Malaysian economy.
The initiative should help those who are in the low-income category. The initiative would also assist EPF members who are non-active and have accounts with the pension fund that have gone dormant. In addition, the initiative would also improve the disposable income of the public momentarily as it would allow for the spending on basic necessities such as food, utility bills and rent. This would be able to help boost our consumption since the middle and low-income groups tend to have a higher Marginal Propensity to Consume (MPC), which is a metric that quantifies induced consumption.
Mohd Afzanizam hoped this initiative, along with the reduction in EPF contribution rate by four per cent (to seven per cent) effective April, will allow Malaysians to have more money to buy their daily necessities
As at December 2019, the number of EPF members stood at 14.59 million, with active EPF members numbering 7.63 million. However, by extrapolating from the numbers, the informal sector that would benefit from this could comprise around 4.37 million members.
The i-Lestari withdrawal facility is looking to benefit about up to 12 million contributors, with an estimated total withdrawal of RM40 billion.
Deputy Finance Minister Datuk Abdul Rahim Bakri said the aggregate would definitely have a double impact on the country’s economy, especially the retail sector, and added that the method was the best option, following discussions by the Economic Action Council in a bid to tackle the country’s economic issues.
However, there were many who did not seem to agree with the Government’s move to allow Malaysians below the age of 55 to access their Employees Provident Fund (EPF) second account during the COVID-19 pandemic.
Malaysian Trades Union Congress (MTUC) secretary-general J. Solomon said the EPF savings was a worker’s safety net and it would be immoral to use those savings to cope with the financial impact of COVID-19. Instead, he suggested that the government should dig into its own reserves and pump money into the pockets of employees without having to compromise their old-age savings. He also suggested that the government could instead help those affected by giving out interest-free loans.
MFPC deputy president Dr Desmond Chong said the move could backfire on those who use the money for investments. He said with the current situation with the fluctuating market, this would be a risky proposition. In the end, the contributor may have to work longer to accumulate the same amount of money.
Former Domestic Trade and Consumer Affairs Minister Datuk Seri Saifuddin Nasution Ismail also weighed in on the issue and said the proposal would defeat the purpose of having the retirement fund. He mentioned that most Malaysians already don’t make enough to have their EPF savings sustain them after retirement.