KUALA LUMPUR: The Employees Provident Fund (EPF) says the potential move to introduce a monthly drawdown option will require a generational change.
The transition is necessary as the average life expectancy in the country has increased, the EPF said when clarifying reports about the monthly withdrawal option for its members.
The EPF said it has been working towards establishing a more pension-like approach towards providing members with a more stable income in their post-retirement years.
This can be seen from its current encouragement to members to voluntarily shift to regular monthly payout rather than lump-sum withdrawals.
In 2022, more than 7,000 members have already voluntarily adopted the monthly payout option.
"The process of formalising the proposed monthly withdrawal mechanism is still being studied and will take into account the ability and readiness of members to make such transition.
"The proposed changes will most likely require a generational change and the conversion will take time.
The EPF, nevertheless, believes that such a transition is necessary given that Malaysia's average life expectancy has increased from 54 years in 1957 to 75 years today.
It is projected to further increase in the future, translating into longer years spent in retirement.
"The EPF will continue to encourage its members to voluntarily convert to the monthly drawdown option."
It added that the monthly drawdown is needed to prevent old-age poverty and for consumption smoothing during retirement.
"The EPF is taking a pragmatic and practical approach to the proposed policy enhancement, balancing the needs of current members against the desirability of sustaining members' savings after retirement," said the EPF.
The potential monthly drawdown will allow a portion of the member's savings, up to a certain limit, to be converted into a monthly income and the remaining portion can be withdrawn lump-sum.