The Malaysian Insight

DEBTS, loss of income and uncertainty about the future are the driving factors for those who plan to withdraw their savings from their Employees’ Provident Fund (EPF) Account 1.

Any concern about how they will replenish the funds meant for their retirement is hardly a consideration now as they struggle to cope with the Covid-19 pandemic’s impact on the economy and their livelihoods.

Poven Sanmugasundaram, 29, who lost his job as an events manager in March, said he will take up the offer to withdraw the funds under the EPF’s i-Sinar scheme.

“I was earning up to RM5,000 prior to the pandemic and now, I am only earning about RM2,500. So, if this pandemic goes on, I have no choice but to withdraw from my EPF,” he told The Malaysian Insight.

Poven started his own business providing advice on the stock market, but said the earnings are not stable.

“I have house and car loans which add up to about RM3,200 a month, which I have not paid since April, thanks to the moratorium.

“But now that the moratorium has been lifted, I have to look at other avenues.”

Under the i-Sinar programme, about two million EPF contributors, who have either lost their jobs, are on no-pay leave or have no other source of income, are eligible to access up to 10% of their Account 1. Applications can be made beginning December.

This works out to withdrawals of up to RM9,000 over a period of six months for those who have RM90,000 and below in their Account 1, with RM4,000 given as an advance in the first month and the balance divided over the remaining months.

Those with more than RM90,000 in Account 1 can also access up to 10% of the funds but the advance is capped at RM60,000.

Former network engineer Zamri Mohd Ramli,39, who lost his job in April, said he was not thinking about funds for his retirement as he has pressing needs now.

The father of two said it is extremely difficult to get a job now and even if he gets one, companies would not pay what he is worth.

To make ends meet, he is now working part-time as a life planner. 

“I’m not that worried about my retirement funds as the amount won’t be affected that much.

“In my case, I can only take out a maximum of RM10,000, according to my account.”

Grab driver Puvenesh, who would only give his first name, said he has little choice but to dip into his Account 1.

“Income for the past few months has been very low and now it’s worse with the conditional movement-control order (CMCO). There are very few passengers and, therefore, less income. 

“There are no tourists, no business from hotels and since the universities are closed, there are no students to ferry around,” said the 37-year-old.

Puvenesh plans to use his EPF funds to pay off some debts and bills which have been stacking up.

Taxi driver Abdul Hakim, 50, is a bit more cautious about tapping the savings, saying he would discuss the matter with his wife first.

“We are facing financial difficulties but we also have to think about the future. 

“This is our savings, so I will see what my wife thinks before withdrawing it, as we have three children,” he said.

Retrenchment exercises saw a significant increase in the first half of 2020 with 36,196 employees made redundant during the period, as firms embarked on downsizing to survive the economic impact of the pandemic.

Job vacancies have also declined by 50.8% to 251,944 while the number of active job seekers increased by 16.9% to 277,840, of whom 2% are new registrants.

EPF, meanwhile, describes the i-Sinar scheme not as a withdrawal of funds but as an “advance”, which must be replenished by fund contributors.

The funds are “advanced” to account holders must be replaced with future EPF contributions, it said, by placing 100% of contributions into Account 1 until the sum is completely replaced.

The distribution rate will then return to the usual 70:30 ratio between Account 1 and 2. – November 24, 2020.