GEORGE TOWN: The government has been urged to set up a fund and provide financial aid to those in need and not allow Employees Provident Fund contributors to further withdraw their retirement savings.
Consumers Association of Penang (CAP) president Mohideen Abdul Kader said in these challenging times, the government must not allow employees' savings to be further eroded and help those who need financial relief.
CAP, he said, had cautioned the government several times about allowing EPF members to withdraw their savings through the i-Lestari and i-Sinar initiative in 2020, i-Citra in July last year and a special withdrawal initiative in March this year.
"However, it fell on deaf ears. EPF funds are meant for its members' retirement and not for them to tide over financial difficulties during the Movement Control Order.
"Such withdrawals will leave them impoverished," he said today.
Mohideen said CAP's concerns had been proven correct when the media reported early this month that EPF members withdrew RM145 billion under the four withdrawal programmes, and almost RM10 billion from the impact of the employee share statutory contribution rate reduction programme, thus totalling about RM150 billion.
As a result of the withdrawals, he added, a total of 6.62 million members (52 per cent) of the total of 12.78 million EPF members under 55 years old had savings of less than RM10,000.
Another 3.2 million (25.04 per cent) of the age group had less than RM1,000 of EPF savings.
According to Deputy Finance Minister I Datuk Mohd Shahar Abdullah, EPF members could choose to contribute beyond the employee statutory contribution rate of 11 per cent at any time.
"His suggestion is without basis, not having regard for the situation on the ground.
"With the soaring inflation rate, people are finding it hard to survive each month and it will take the country a few years to recover.
"Is it realistic to expect the B40 and lower M40 EPF members to contribute more than the statutory 11 per cent within the next few years?" asked Mohideen.
According to EPF, a person will need to save at least RM240,000 by the time he retires at 55 years old to cover basic needs, such as food and everyday costs.
"That doesn't take into account the depreciating value of their savings due to inflation."
In March 2022, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said EPF would have to "dispose of more overseas investments".
He added that it had also needed to cease domestic investments in the short to medium term if the special withdrawal of RM10,000 was to be allowed.
"It is not good news for the 14 million EPF members.
"The combined effect of employees withdrawing their savings and the reduction in their statutory contribution rate force EPF to sell its assets to pay reasonable dividends. It paid a dividend of 6.10 per cent for conventional savings and 5.65 per cent for Syariah Savings for 2021, amounting to a total of RM56.8 billion.
"How can this go on? When the chicken comes home to roost, there will be insufficient funds to pay dividends," he said.