Special Withdrawals May Leave Bumiputera Epf Members Worse Off

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If figures released by the Employees’ Provident Fund (EPF) last week do not worry our politicians, especially those who have been pushing for the special withdrawals, we are in serious trouble.
Millions of EPF members now have a shrivelled Account 1 containing retirement savings, and next to nothing left in Account 2 to cover for housing, medical or further education expenses in the next three to four years, or more.
The latest special withdrawal, the fourth in a series since Covid-19 struck in March 2020, came after a huge populist push, mainly by Umno, that led to Prime Minister Ismail Sabri Yaakob relenting to demands, although reluctantly. Especially after saying a flat “no” earlier.
The pressure was so great especially during the Johor state elections that Ismail had to do a 15-minute live broadcast on allowing the withdrawals soon after BN won, something that could have been done by EPF or the finance minister through a press release.
He was under further pressure when PKR and DAP suddenly joined the push for the withdrawals, obviously having realised during the election campaign that many Malaysians wanted to withdraw their money.
Those Malaysians who just wanted to take their money out of EPF may not have known that the pension fund is probably the safest and best place to leave their savings for now.
So far, these withdrawals have wiped out more than RM150 billion from the savings of 5.2 million of the 12 million EPF members. The latest one alone was RM52 billion and the number is set to grow as the closing date for withdrawals is April 30.
Malays made up the bulk of applicants at 63%, followed by the Chinese (12%), and Indians (7%). The remaining 17% were Bumiputeras from Sabah and Sarawak, and a small number of non-Malaysians.
So the government threw caution to the wind and decided to be popular. Pleasing the Bumiputeras became a priority, which I believe was for their votes. Ironically, it did please the people, although it was their own hard-earned savings that were being dished out.
With zero savings in their Account 2 now, many will be deprived of an opportunity to save on the interest of their housing loans. For first time purchasers, there is nothing in their Account 2 to help them with the down payment.
The situation is the same for those wanting money for medical needs or to fund their studies for themselves or their children. It will take three or four years before they can start seeing some money going back into Account 2. And probably another few years to see a decent amount.
This is because of the “replenishment” policy introduced by EPF under the special withdrawal scheme which says 100% of the monthly contributions will go into Account 1 (old age savings) until the total amount withdrawn plus a 20% addition is “settled”.
EPF said the rationale behind this move is to ensure they have enough after they retire. “The 20% is based on the estimated loss of dividend of an average of 5% per annum, with the replenishment expected to take about four years,” it said.
This is to ensure their retirement savings are refortified and they enjoy the dividend pay-outs like the rest. Currently, 70% of the monthly contributions are placed in Account 1 and the rest in Account 2.
So if someone had taken a total of RM20,000 so far, the member has to put back RM28,000 into Account 1 before 30% of his monthly EPF payments start going back into Account 2.
In this context, if one’s total monthly contributions is RM1,000, it will take 28 months before he or she can start rebuilding Account 2. This is a conservative estimate as the monthly contributions of many are much less.
In the meantime, many have lost their livelihood and have gone into freelance work, and will not be able to contribute to EPF, which will be their main source of support after they retire.
Obviously, the government has taken the easy way out by allowing these withdrawals, with scant regard to the obvious long-term hardship these members will face.
And of course many would have opted for this, knowing pretty well that they can depend on the government for welfare aid in future.
Whether inadvertently or by design, these special withdrawals have created a huge group of private sector employees who will have to depend on the government after they retire.
Even now, many wait for welfare payments periodically, the name of which changes each time the government is replaced.
Actually, there is nothing wrong with the government assisting those who are really in need like those in the B40. But when it makes this pool bigger with populist policies with the taxpayers having to bear the brunt of decisions which are lopsided, then we have a problem.
Whether one likes it or not, the figures speak for themselves. The Bumiputera contributors have not only become “poorer,” but their post-retirement years may require much government intervention.
All these while the minority T20 retirees and government pensioners live fairly comfortably without having to wait for government handouts for survival. - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT,

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