KUALA LUMPUR: Imposing a blanket policy, including a mandatory rule for Employees' Provident Fund (EPF) contributors to withdraw from the fund periodically, could be bad in the long-run.
Experts said such a proposal will not bring benefits for as long as the issues of low wages and financial illiteracy among the people are not properly addressed.
Centre for Market Education (CME) chief executive officer Dr Carmelo Ferlito said he believed the rationale behind the proposal might be an attempt to transform the fund into a form of 'regular pension'.
"The issue will persist for those who do not have enough savings.
"The problem lies in the economy, in general. It is not about the workings of the pension fund, but people's savings capacity.
"I believe that a more structural system with different options in place, would be better (for EPF withdrawals). It is difficult to imagine a solution that fits everybody," he said when contacted by the New Straits Times.
He said when people have no capacity to save much money, no long-term saving scheme will work well.
"I believe that generalised solutions such as imposing mandatory withdrawal schemes (either conditional or periodical), would be bad."
Ferlito said capping the maximum amount of retirement funds that can be withdrawn in a lump sum could possibly help, but even such a proposal must complement other general strategies to strengthen financial literacy.
Putra Business School Master of Business Administration (MBA) Programme director Associate Professor Dr Ahmed Razman Abdul Latiff said more should be done to improve the average salary to allow people to increase their savings capacity.
He said 50 per cent of workers in the country were still earning less than RM2,500 every month, despite the rising cost of living.
"There's an elephant in the room, and we're rather reactive than proactive in making efforts to increase the average salary.
"How can we expect them to increase their contribution in their EPF accounts when there's not much improvements to the salaries?
"We're losing competitiveness, talents and many employers are resorting to quick measures including depending on cheaper foreign labour, which means outflow of currency, hence contributing to the weakening of the ringgit."
Razman said the idea for periodic EPF withdrawals, which is akin to pension, should be conducted on a voluntary-basis, rather than making it mandatory.
He also said capping the amount of money allowed to be withdrawn among eligible EPF contributors should be based on certain conditions because "one shoe doesn't fit all".
"As with the requirements imposed on certain withdrawal types such as the housing repayment, a different set of criteria could also be implemented in allowing the lump sum withdrawal for EPF members.
"This is because, some members would still have financial commitments and continue servicing their loans even after retirement. This should be looked into."
Razman said the cost of living in urban areas like the Klang Valley differ from other areas, and this needs to be considered for any policy on withdrawals.
He also said the government should consider more schemes to top up EPF members' savings.
The government is in the final stages of fine-tuning the proposal to make it mandatory for new EPF contributors aged 55 years and above to withdraw their savings periodically, instead of in a lump sum upon reaching 55 years.
Prime Minister Datuk Seri Anwar Ibrahim, who is also Finance Minister, said today that the government has no objection towards the proposal by EPF and will leave it to the pension fund to execute the proposal.