According to Deputy Finance Minister I Datuk Mohd Shahar Abdullah, the level of savings among Employees Provident Fund (EPF) members is extremely low and cause for concern, particularly in light of the four withdrawal options implemented and resulted in RM145 billion in withdrawals from members.
Due to the Covid-19 crisis, four withdrawal programmes were implemented: i-Lestari, i-Sinar, i-Citra, and a unique one-time withdrawal of RM10,000. Mohd Shahar stated in Parliament on August 8 that this is in addition to the reduction in the employee share statutory contribution rate for 27 months from April 2020 to June 2022.
The impact of the withdrawal programmes
Overall, the impact of these Covid-19 programmes on members' savings is estimated to be RM155 billion, consisting of RM145 billion withdrawn by members under the four withdrawal programmes and nearly RM10 billion from the effect of the employee share statutory contribution rate reduction programme.
Mohd Shahar responded to Senator Datuk Razali Idris' query about ways to save EPF members with savings of less than RM10,000. 55% are Bumiputeras, while 79% of EPF members with savings of less than RM1,000 are also Bumiputeras.
According to the Paya Besar Member of Parliament, as of June 30, 6.62 million members, or 52% of the total of 12.78 million EPF members under the age of 55, had savings of less than RM10,000. Bumiputera members made up 4.99 million of that total or 75%.
At the same time, there were 3.2 million members under the age of 55 with a very low savings level of less than RM1,000, with 2.58 million (81%) Bumiputera members.
"By comparison, 8.22 million Bumiputera members make up 64% of the total of 12.78 million EPF members under 55."
"This demonstrates that the majority of Bumiputera members are concentrated among members with low EPF savings compared to other races," he said.
Rebuilding members' savings
Mohd Shahar stated that the EPF provides several channels to make it easier for members to donate to the EPF itself to enable members to increase and rebuild their retirement savings.
"Members who are employed and have an employer may contribute more than the employee share statutory contribution rate of 11% at any time." Furthermore, they can contribute [to the EPF] at any time, up to a limit of RM60,000 each year," he explained.
Mohd Shahar stated that self-employed members, have no fixed income, or are outside of the labour force, such as students and housewives under the age of 60, can also choose to voluntarily contribute to the EPF at any time in accordance with their capabilities under the i-Saraan programme, up to RM60,000 per year.
"As an incentive to encourage this group to save through i-Saraan, the government contributes 15% of total contributions, up to RM250 per year," he added.
Under Program Kasih Suri Keluarga Malaysia, which was created to encourage women from low-income households to save for their old age, housewives under 55 and listed under the eKasih database may also voluntarily contribute to the EPF on behalf of themselves or their husbands.
Members who contribute RM5 per month or RM60 per year are eligible for a government incentive of RM40 per month or RM480 per year into their EPF accounts under this programme.
Mohd Shahar added that the EPF had kept hammering home how crucial it is to be aware of and knowledgeable about financial planning in order to balance current financial needs with retirement plans in the future.
Source: The Edge Markets