AS Malaysia's employment patterns change along with a demographic shift, the Employees Provident Fund (EPF) has moved in tandem by restructuring its accounts and introducing Akaun Fleksibel.
Economists said the EPF's decision to allow its members the option to transfer part of their savings balance in Akaun Sejahtera to Akaun Fleksibel and Akaun Persaraan was in response to the public's needs, especially after the Covid-19 pandemic hammered the country economically for two years.
The main objective of the account restructuring initiative is to boost members' savings for their post-retirement needs while at the same time provide flexibility for members to access cash for short-term needs.
A series of withdrawals allowed by the government had led the EPF to conduct an in-depth study in line with the challenges faced by the rakyat, especially on the higher cost of living.
"Hence, Akaun Fleksibel was created to fulfil the demand and, at the same time, balance the financial needs after retirement .
"This has shown that the EPF has acted in line with the changing employment patterns and demographic shift, and continues to do so through data gathering," Universiti Kuala Lumpur's Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid told the New Straits Times.
SUPPORTING MALAYSIANS AMID RISING COST OF LIVING
Malaysians have since withdrawn a substantial amount from their Akaun Fleksibel.
Up to July 19, RM12.57 billion has been transferred to Akaun Fleksibel by some 3.83 million members.
Finance Minister II Datuk Seri Amir Hamzah Azizan said RM8.88 billion had been withdrawn by members under the age of 55, giving a vital lifeline for many households grappling with increased expenses.
Aimi Zulhazmi said the injection of nearly RM9 billion back into the economy had a pronounced effect on consumer spending patterns.
He said a substantial portion of these withdrawals had been directed towards daily necessities and monthly expenditures, underscoring the crucial role of EPF funds in meeting basic needs during challenging economic times.
"This injection partly contributed to the strong domestic economy performance for the second quarter of 2024, which is expected to record a 5.8 per cent growth," he said.
In addition, a significant development has been observed.
Following the transfer of the initial amount into Akaun Fleksibel by EPF members, up to July 19, RM5.61 billion has also been transferred to Akaun Persaraan.
This transfer to Akaun Persaraan highlights a substantial enhancement in members' savings, allowing 39,000 members to meet their basic savings threshold.
GROWING ONE'S OWN ACCOUNT NOW A TREND IN MALAYSIA
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said Malaysia had witnessed an increasing number of voluntary contributors.
Afzanizam said these individuals, distinct from salaried employees, often experienced fluctuations in their income streams, which underscores the importance of financial flexibility and resilience.
He emphasised that Akaun Fleksibel played a crucial role as a buffer during periods of liquidity crunch for those making self-contribution.
"The nature of work and income among these workers differ significantly from that of salaried employees. Having access to a flexible account can serve as an interim measure to manage financial uncertainties and maintain stability during income fluctuations," he said.
BOOSTING SAVINGS FLEXIBILITY
Recognising a strong demand for greater access to savings, the EPF responded by launching Akaun Fleksibel, which allows members increased flexibility in managing their funds while ensuring robust protections for retirement.
Economist Professor Dr Geoffrey Williams said this strategic adjustment reflected evolving employment dynamics, demographic shifts and the need to fortify retirement security for all members.
"Overall it is a very good, well-designed change based on evidence and research.
"However, there is still a concern for people who are older and who do not have enough EPF coverage or other retirement savings, so the government needs to address this.
"The EPF is doing everything it can but it cannot do this alone," said Williams.
LONG-TERM RETIREMENT SECURITY
Recent reforms by the EPF have ushered in significant changes aimed at strengthening both long-term retirement security and immediate economic stimulus.
The revisions include an increase in protected savings in Akaun Persaraan.
Simultaneously, Williams said the introduction of Akaun Fleksibel offered members controlled access to short-term funds while preserving the integrity of their long-term savings.
"In economic terms, the withdrawals might be as much as RM25 billion for extra consumer spending and this will support economic growth.
"Around RM11.5 billion was transferred to Akaun Fleksibel and around RM7.8 billion has been withdrawn by the end of June, so this is about one-third of the expected RM25 billion so far.
"It looks like people are being prudent, which is a good sign but the extra spending is good to support domestic demand given global headwinds," he said.
CONCERNS OVER DEPLETING SAVINGS
The recent surge in EPF withdrawals has significantly bolstered consumer spending, a factor highlighted by the Department of Statistics Malaysia in its advance estimate for the second quarter of the year's gross domestic product (GDP), which stood at a robust 5.8 per cent.
However, concerns linger regarding the depletion of savings, particularly among those without substantial EPF funds.
Penang Institute economist and socioeconomic researcher Doris Liew said while increased consumer spending could stimulate the economy, particularly the services sector, as indicated by the second quarter advanced GDP data, it's crucial to note that depleting savings largely fuel this spending.
"For lower-income earners, this could have dire consequences. With reduced savings in Akaun Sejahtera for housing and retirement, their financial future becomes increasingly uncertain," she said.
Ideally, Liew said Akaun Fleksibel should be used strategically, perhaps to pay off high-interest debt. However, she said the current trend pointed towards impulsive spending, creating a false sense of wealth.
"It's essential to educate the public about the importance of long-term financial planning and the potential pitfalls of easy access to funds.
"The government must carefully monitor the situation and consider measures to encourage responsible use of Akaun Fleksibel while protecting the retirement interests of Malaysians."