The Malaysian Insight

THE withdrawal of retirement funds from Account 1 of the Employees Provident Fund (EPF) will come at a higher cost to social welfare in the future, an Ernst & Young Tax Consultants Sdn Bhd (EY) webinar heard today.

“Withdrawal of savings certainly helps EPF members to survive better now, but may inevitably increase the cost of social welfare in future with increasing cost of living,” said Chia Mee Leng, EY’s director of People Advisory Services.

Chia said Malaysians should be warned of the consequences of withdrawing money from their Account 1 through the i-Sinar facility.

The facility is the government’s initiative to ease the financial burden of EPF contributors who have lost their jobs during the Covid-19 pandemic.

i-Sinar is targeted at 2 million members with an estimated advance of RM14 billion to be made available.

Chia said Malaysians faced a difficult choice in deciding whether to withdraw through i-Sinar.

The majority of contributors do not have the minimum retirement savings, which EPF pegs at RM228,000 at the age of 55.

“This equates to monthly withdrawal of RM950 to cover basic needs for just 20 years. Currently, less than 20% of EPF members have that minimum amount in their accounts,” Chia said.

Aside from the i-Sinar initiative, the government has also proposed to extend the minimum 7% monthly employee EPF contribution rate throughout 2021 to increase workers’ take-home pay.

The reduction in minimum contribution rate from 11% was announced earlier in April, under the economic stimulus package.

Employees can opt out from the proposed 9% and continue to contribute at 11%. – November 17, 2020.