KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) does not support the call for Employees Provident Fund (EPF) members to further withdraw from their retirement accounts.
In a statement today, MIER said it strongly felt that sound economic reasoning should guide EPF withdrawals, not populist policies.
"The government-initiated withdrawal schemes – i-Lestari, i-Sinar, and i-Citra that amounted to RM101 billion, while managed to provide some financial relief, have resulted in severe depletion of retirement funds for most of the EPF members," it said.
According to MIER, the EPF's mass withdrawals had resulted in 6.1 million members now having less than RM10,000 in their EPF accounts, with 3.6 million members having less than RM1,000.
This level is undoubtedly a far cry from the threshold of RM240,000 essential savings by the age of 55 for members to enjoy a dignified retirement.
"The EPF is not designed to deal with calamities and pandemics. Rather, it is intended to ensure that its contributors enjoy a decent life after retirement," it said.
MIER said Malaysia was just nine years short of becoming an aged nation in 2030, and further EPF withdrawals would put additional pressure on the future cost of healthcare, income security and a post-retirement income stream.
The firm said the previous three EPF withdrawal schemes were short-term measures, which should have been avoided in the first place, and must never be repeated.
"Instead, to address the short- term fiscal constraint Malaysians face, there is a strong economic justification for the government in providing sufficient unconditional cash assistance to the households and firms.
"Long-term measures are imperative to ensure that the members have adequate savings for retirement.
"One such proposal is to adjust the employer's EPF contribution rate without increasing the employers' labour cost burden," it said.
MIER has suggested that the government marginally increase employers' contribution rate for workers above a specific threshold limit and simultaneously decrease the rate for those below the threshold level.
For example, employers with a monthly income of RM20,000 or more can be lowered by one per cent, and the contribution rate of employers with a monthly income of less than RM5,000 can be increased by one per cent, it said.
Meanwhile, MIER said the government must also consider broader social protection and social safety net strategies.
It said there should be contingency plans and schemes that can kick-in in the face of calamities and other crises.
"A disaster relief fund should also be considered. At the same time, the coverage and adequacy of social protection, particularly towards the self-employed and those in the informal sector, must be strengthened.
"The post-retirement well-being of the EPF members is at stake if the government yields to the demand for further withdrawal of EPF funds.
"Instead, the government has to consider other policy measures that ensure that EPF members are secure in their hopes for a better future," it added.