Over RM52 Billion Lost in Retirement Savings

The latest special withdrawal under the Employee Provident Fund (EPF), has so far resulted in more than  RM52 billion worth of retirement savings being withdrawn so far. With more than 5.3 million applicants, being able to withdraw up to RM10,000 from their savings until the end of April, total withdrawals across all four of these EPF withdrawals have resulted in more than RM150 billion ringgit removed from 5.2 million EPF accounts. 

But who exactly withdrew from their accounts and what did they do with it? 

This fourth round of withdrawals, allegedly the last of its kind, was initiated to help members of the public who were still affected by the effects of COVID-19 and recent flood damages. This withdrawal allowed members, under the age of 55 years old, to withdraw up to RM10,000 from their savings. 

According to reports as of April 14, 2022, out of the 5.3 million applications received by EPF for its Special Withdrawal facility, accounted for 44% out of the 11.95 million eligible EPF users. This includes 55% of its B40 members (earning less than RM1,700), 59% of M40 members (RM1,701 – RM4,900) and 39% of its T20 members (earning RM4,901+). 

EPF has started that the majority of applicants were from the Bumiputra Malay community, making up 63% of applicants. This was followed by Bumiputera Sabah & Sarawakians (17%),  Chinese (12%), and Indians (7%). 

Top Three Reasons for EPF Withdrawal

According to EPF, the top three reasons for special withdrawal applications were due to a reduction in income or wage (24%), followed by wanting to assist affected spouses or family members (23%), and a means to increase sources of income (14%). 

Whilst results of the survey showed that the majority of the money withdrawn had been intended for immediate needs of EPF members such as 40% put their money towards daily or monthly essential expenditures; 26% channelled it to settle any outstanding debts; 8% wanted to increase their emergency funds and 7% wanted to assist affected family members. Less than 20% of applicants were going to use the proceeds for other long term purposes, such as children’s education, non-essential expenditure, and investments.

This is to be expected with the recent Consumer Price Index released by the Department of Statistics Malaysia showing a moderate increase from 2.2% from 122.5 in February 2021 to 125.2 in February 2022. The reality of basic ingredients such as condensed milk and evaporated milk to make coffee or tea, vegetables, poultry, eggs and other food items is just becoming more expensive.

With the constant rise in food prices, along with persisting inflation and the Raya celebrations, the withdrawal did ease the financial burden of its contributors. However, it is important to remember that these measures are only effective in the short term. In the long run, users that have exhausted their savings early on will be left with almost nothing in the future, ultimately triggering more social problems.

Under the previous three rounds — i-Lestari, i-Sinar and i-Citra — implemented since the Covid-19 outbreak in 2020, resulting in more than RM150 billion ringgit removed from 5.2 million EPF accounts.  

Post withdrawals, EPF has moved to remind its members to consider their long-term income security and only withdraw their savings if it is absolutely necessary and to utilise the money wisely and for appropriate purposes.

References:

Parkaran. K. (2022). Special withdrawals may leave Bumiputera EPF members worse off. Free Malaysia Today. Link. 

Ikram. I. (2022). EPF: Applications to withdraw RM40b received under the Special Withdrawal facility. The Edge Market. Link.

Yeo. A. (2022). Financial literacy the responsibility of all. Khmer Times. Link.