Epf Payouts Making Well Off Members Richer

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The much awaited dividend announcement of the Employees’ Provident Fund for 2021 was a pleasant surprise for many contributors, especially those with super high savings in the scheme.
The 6.1% dividend rate was the highest since 2017 when EPF declared a 6.9% dividend.
Some people are now actually taking out their savings from fixed deposits in banks and dumping it into the EPF as interest rates of financial institutions have been pretty low over the last few years.

EPF allows its members who are retired to add a maximum of RM60,000 per year to their savings while children are allowed to top up their parents’ savings and spouses may top up each other’s accounts.
EPF had about 400,000 members with savings of RM500,000 and above in 2018. About 40,000 members have more than RM1 million each, while about three million members have between RM50,000 and RM100,000 in their account. Those with between RM100,000 and RM500,000 in savings make about 2.7 million contributors.
They are the biggest winners when EPF declares dividends.
But the saddest category of EPF members would be the 48% or about seven million people whose savings amount to less than RM10,000 each, as stated by EPF chairman Ahmad Badri Mohd Zahir on March 2.
One former board member said there could have been some from this group who might not have received a sen following the special withdrawals.
Some 7.3 million members had applied for at least one or all three of the Covid-19-related special withdrawals (i-Lestari, i-Sinar and i-Citra) in which a total of RM100.9 billion was withdrawn between April 2020 and February 2022.
The amount not saved with the EPF rises to RM110 billion if you include the RM9 billion that was not contributed by members because of the reduction in the employees’ statutory contribution rate during the pandemic.
The rate went from 11% to 7% between April and December 2020, and from 11% to 9% between January last year to June this year. Here again, it was the same category of members who had opted for this. The richer ones continued with 11%.
What does this show? It proves that well-off members of EPF are getting richer while the 48% who actually need this old-age savings to survive have become poorer.
If something is not done to change this trend,  it will be a huge burden on any future government as those retiring will be struggling to survive.
Despite the figures speaking for themselves, some political parties are shockingly pushing for the withdrawal of another RM10,000 to be allowed under the i-Citra scheme.
Surprisingly, the strongest proponents of this move appear to be former prime minister Najib Razak and the Umno Youth movement. This may appear as a short-term aid but isn’t it obvious that the long-term repercussions are far reaching?
This group of Malaysians from the private sector do not have any other form of retirement savings and may end up depending heavily on the state or on their children. Some of the older folks may even go into depression, having to struggle for survival.
World Bank estimates show that Malaysia now has 7% or more of its population aged 65 and above, which makes us an “ageing society” according to international convention.
After 24 years, Malaysia will become an “aged society” when this number reaches 14%. And 12 years after that, the country will become “super-aged”, with the share reaching 20% of the population.
With 90% of the retirees depending on EPF for their old age survival, we have to brace for a serious problem in the future if nothing is done.
The government could have avoided this by giving out the RM101 billion from EPF as interest-free loans to those in need. This could have, to a certain extent, prevented those from taking their money out from EPF and losing the dividend payments.
EPF says it is hoping to rebuild the savings of this group so as to help them in their old age. But how?
One of the suggestions was for the introduction of multi-tiered dividends, in which a higher rate is paid to accounts with low savings and a lower rate to those with above a certain amount. This is similar to the tax brackets where the richer pay higher taxes.
But when a local daily put out an article on this to see the reaction of Malaysians, most opposed it. This obviously will benefit the lower income EPF contributors mainly in the B40 and M40 groups in the long run. This is akin to a socialist system where earnings are distributed for a balanced social development in mind.
Obviously, any such move is expected to trigger much anger and objection in a society which is already steeped in lopsided policies that benefit mainly one segment in most areas. It’s tough for Malaysians to see the larger picture under the circumstances.
There is no silver bullet to resolve the huge EPF disparity. The government should waste no time to find a solution for the seven million members who have been dragged down because of the special withdrawals.
The longer the government waits, the bigger the problem will be. It has to move away from populist policies centred on winning votes in elections, which is dragging the nation down. - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.

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