People torn over Account 1 suggestion
KUALA LUMPUR: Economists, consumer groups and politicians are split over calls to allow contributors to dip into their Employees Provident Fund (EPF) Account 1 to tide them over during the Covid-19 pandemic.
Sunway University Business School of Economics Professor Dr Yeah Kim Leng said allowing EPF contributors to withdraw money from their Account 1 should be done only as a last resort because the provident savings were critical for contributors, especially those from the lower income group in their retirement years.
Bank Islam Malaysia chief economist Dr Mohd Afzanizam Abdul Rashid said EPF savings, especially in Account 1, were allocated for a person’s retirement. “The pandemic has led Malaysians to lose their jobs.
The natural thing to do is to dip into one’s savings for daily needs. However, it is a delicate balance between those surviving in the present time and protecting the nest egg for future consumption,” he said.
As of now, Afzanizam said the government had allowed flexibility for EPF members to withdraw their retirement savings for the purpose of dealing with the pandemic via I-Lestari.
This was in addition to the optional reduction of the contribution rate from 11 per cent to 7 per cent to give more disposable income to EPF contributors.
Although the government has introduced measures to help the people during these troubling times, Afzanizam did not discount the possibility that there could be issues related to the delivery of such measures.
He said this included financial aid not reaching the intended recipient at the right speed or someone who is not qualified may have received the aid.
“Therefore, it is critical (for the respective ministries) to carry out ‘data cleansing’ so that only the right people will enjoy the aid.
“The aid should differentiate between the rural, suburban and urban areas as each location would have different levels of living cost. It has to be granular and detail-oriented in terms of who should get the aid.
“Awareness campaigns on the stimulus measures would need to be intensified.”
Yeah said apart from reconciling inadequacies existing in the distribution of the financial aid, the government should also consider introducing new financial facilities, such as interest-free loans for a defined purpose or emergency purposes for the low income group.
The authorities, he added, should look into ways to supplement the income of those hit by the pandemic.
“The government should look into ways of making sure that there are jobs available, especially for those who become unemployed due to the pandemic. Providing support and aid should help them to get back on their feet,” he said.
Federation of Malaysian Consumers Associations chief executive officer Datuk Dr Paul Selvaraj urged the government to look into ways to bring down the cost of living.
The move would ease the burden of those affected by the economic impact brought about by the pandemic.
In contrast, however, is the approach taken by the Malaysia Consumers Movement, which is advocating a portion of funds to be withdrawn from Account 1.
The move would ease the financial burden faced by the contributors affected by the pandemic, said MCM president Darshan Singh Dhillon.
He said though the EPF savings were meant for retirement, allowing withdrawals from Account 1 would help those struggling to make ends meet.
“We believe that it (the withdrawal) should be allowed, subject to available funds in the members’ own Account 1.”
Darshan, however, said the withdrawals should be treated on a case-to-case basis, with a withdrawal limit of RM10,000 or based on available funds.
He said the move would ensure only those heavily impacted by this pandemic were allowed to withdraw their EPF savings.
On measures that could be considered to put cash in the hands of affected Malaysians, Darshan said the government could provide a tax break for personal income tax contribution to those earning up to RM10,000 per month.
He said the government could maintain the Bantuan Prihatin Nasional payouts and increase the personal income tax contribution of high-income earners until the situation improves.
Umno Youth chief Datuk Dr Asyraf Wajdi Dusuki called on the government to allow contributors to withdraw from Account 1, with a minimum amount of RM5,000 and a maximum of RM10,000.
He said although the government justified EPF’s contribution was for retirement, the people had expressed their grievances on how Covid-19 had impacted their daily life. Asyraf said Umno Youth would bring up the matter, along with suggestions to Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz soon.
The suggestions include giving flexibility of withdrawal to those facing financial difficulties and for withdrawal to be made gradually instead of a one-off payment.
“The contributors can add the contributions back to their accounts when the economy recovers.”
He said should four million contributors were allowed to withdraw RM10,000 each, there would be RM40 billion in cash flow.
“The cash flow will create a multiplier effect that can boost economic growth.”