Introduced in 1951, the EPF (Employees Provident Fund) compulsory retirement savings scheme for private sector workers requires employees to contribute 11% of their salaries to their EPF accounts. Employers, on the other hand, contribute the equivalent of 13% of the salaries of employees earning RM5,000 and below, and 12% if wages are above RM5,000.

 

Here’s the fun-fact. As early as 2016, EPF announced that the minimum savings – Basic Savings – that EPF contributors should have at age 55 was RM228,000 effective 2017. The amount of RM228,000 equals to a monthly withdrawal of RM950 to cover basic needs for 20 years. How did EPF arrive at the RM950 monthly expenses for 20 years?

 

Malaysian life expectancy has improved – males are expected to live for 72.5 years and 77.4 years for females. So if you minus the average life expectancy of 75 years from the moment you retire at the age of 55, you have 20 years to live under retirement fund. And the EPF used the minimum pension for public sector (government employees) as a yardstick – RM950 per month from age 55 to 75.

The EPF then revised the RM228,000 figures to RM240,000 effective Jan 2019 – raising the money needed to survive from RM950 to RM1,000 per month. Perhaps the EPF used 2.5% annual inflation rate to revise the extra RM50 for 2 years. Of course, surviving on RM1,000 per month in city like Kuala Lumpur or Petaling Jaya is almost impossible to begin with.

 

In July 2020, after much pressure and criticism, Malaysian government reluctantly revised the national poverty line income from RM980 to RM2,208 – plunging more than 400,000 households into “poor” category. Still, it doesn’t make sense that the minimum wage is at RM1,100-RM1,200 when the new poverty line is now RM2,208. What do you call those who earn RM1,200?

 

Let’s assume one can survive every month with just RM1,000 during their retirement. But the problem is, only 18% of EPF contributors have the minimum savings target of RM240,000 in their account by 55. A jaw-dropping 71% of EPF contributors have savings of less than RM50,000 – meaning they could only retire for 4 years based on RM1,000 per month.

In other words, based on 14.59 million EPF members (as of Dec 2019), there’re more than 10 million who have less than RM50,000 in their savings – only RM208 to spend monthly if they live for another 20 years upon retirement. To make matters worse, over 30% of EPF members have savings of less than RM5,000 in their accounts.

 

That explains why the “i-Lestari scheme” saw a whopping 4.22 million approved applications by June, involving RM1.98 billion in withdrawal from EPF members’ Account 2. In addition to optional reduction of the EPF contribution rate from 11% to 7%, the scheme allows EPF members, aged 55 and below, to withdraw between RM50 and RM500 per month for 12 months until March 31, 2021.

 

While many took the opportunity to withdraw because they did not trust the backdoor government of Muhyiddin, most of them were too desperate for money to resist the temptation of tapping into their own retirement funds. Even the EPF was both surprised and concerned that 70% of its members have chosen to keep their employee contribution rate at 7% (instead of the original 11%).

In spite of the facility to withdraw their own savings to make ends meet, it was revealed that some EPF members had already exhausted their Account 2 after two months – that’s only RM1,000. The scheme should not have been introduced in the first place. The bottom 10% of EPF contributors – the very poor – actually have an average of RM319 in their Account 2.

 

Can you imagine how those with less than RM50,000 in their EPF savings could survive during their retirement, let alone the vulnerable group with less than RM5,000 in their account? Yet, the clueless and incompetent backdoor government of Muhyiddin is studying new suggestions from half-past-six politicians to allow EPF members to withdraw from their Account 1 (account specifically for retirement).

 

Backdoor Prime Minister Muhyiddin Yassin said – “I have discussed with the Finance Ministry and we have basically agreed and are prepared to study the proposal for contributors who really need to withdraw allocations from Account 1.” He was referring to proposals by politicians to allow contributors to withdraw up to RM10,000 from their Account 1.

Politicians, including former Prime Minister Najib Razak, have been pushing the government to allow people in need of cash to drain their savings cookie jar in EPF. If only this crook cares to pay his tax bill of more than RM1.69 billion, which he evaded for the period between 2011 and 2017, the amount of money could be shared among 3.4 million poor Malaysians for RM500 each.

 

Before PM Muhyiddin tells workers to withdraw their hard-earned money in EPF again, he should publicly and transparently explain one thing. What happens to the Prihatin stimulus package worth RM250 billion, Prihatin Supplementary package worth RM10 billion and the National Economic Recovery Plan (Penjana) worth RM35 billion to reduce the impact of Covid-19?

 

Why the so-called RM295 billion worth of “comprehensive people-centric economic stimulus packages”, as the prime minister likes to boast and brag, has no apparent positive effect on the economy or job security ever since they were implemented in March? The people only felt the one-off cash payments to households and individuals in the lower and middle income group – “National Care Assistance” – worth RM10 billion.

Perhaps the RM295 billion economic stimulus packages were nothing but gimmick after all. Finance Minister Zafrul Abdul Aziz had arrogantly said the country has sufficient cash or liquidity without resorting to external loans or issuing bonds in foreign currency. The half-baked minister also said there are no plans to ask special dividends from national oil company Petronas.

 

Yet, two days ago (Nov 2), Minister in the Prime Minister’s Department (Economy) Mustapa Mohamed revealed that the national oil company will pay RM34 billion in dividend to the federal government this year, despite posting a loss of RM21 billion in the second quarter ended June 30, 2020 and originally committed to pay only RM24 billion.

 

Surprisingly, barely 24 hours later on late Tuesday (Nov 3), Petronas suddenly said it had approved an additional RM10 billion dividend to the incompetent backdoor government to help fight the Covid-19 pandemic. Exactly why does the presumably cash-rich Muhyiddin administration need these “special dividends” – RM10 billion on top of RM34 billion – from Petronas?

It seems the country’s coffers are fast running dry under the spendthrift and clueless Perikatan Nasional regime. The reduction of the workers’ EPF contribution to 7.0% (from the original 11%) opted by 70% EPF members has increased the disposable income to close to RM700 million per month – money used to boost the domestic economy.

 

So instead of saving RM700 million every month for their retirement, 70% of EPF members are using their future savings to help the government, who has no idea how to attract local or foreign investors to excite the economy. On top of that, 4.57 million EPF members who had chosen to withdraw from their Account 2 under “i-Lestari scheme” have withdrawn RM7.48 billion from April to August alone.

 

Again, instead of saving for their retirement, 4.57 million EPF members were encouraged by the Muhyiddin government to spend first, worry later. Coming from the horse’s mouth, Najib revealed that up to RM45.7 billion in one-off withdrawals from Account-1 could flow and help boost domestic consumption, if the new scheme is implemented.

Now, can you see how the Muhyiddin government cleverly but irresponsibly trying to open the floodgate of EPF savings to rescue a sagging economy which it has no idea how to fix, when the retirement funds should be safeguarded at all cost to ensure retirees have sufficient funds to survive through their golden years? But why should the backdoor government care?

 

For the 71% of EPF contributors who have savings of less than RM50,000, let alone the 30% of EPF members who have less than RM5,000 in their retirement accounts, how much money would be left if they are allowed to withdraw up to RM10,000 from their Account 1? Instead of helping the people, the people have to use their hard-earned savings to help the government instead.

 

EPF members should reject any plans to drain their retirement accounts. Instead, the people should demand free cash from the government, or at least guarantee of job security if new jobs cannot be created. Why should the ordinary people suffer when PM Muhyiddin has no problem creating a super bloated Cabinet of 72 ministers and deputy ministers, all of whom are being paid by taxpayers?

In 2015, Najib regime admitted that EPF (KWSP, Kumpulan Wang Simpanan Pekerja) had pumped in RM1.52 billion to “invest” in 1MDB, which turned out to be nothing but a bailout of the sovereign fund. After stealing EPF’s money, now Muhyiddin is considering the crook’s plan to suck up more money from the retirement fund to arrest the current “Third Wave” of Covid-19, the wave created by the power-crazy premier himself.

 

Will the EPF contributors be asked to withdraw more of their savings should there be a fourth or fifth wave, while the rich, corrupt and incompetent politicians continue to draw five-to-six-figure salaries and perks? The government can print money, re-impose new taxes such as GST (if they dare) or even sell national assets to raise money. Just don’t touch the EPF retirement fund.

 

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November 5th, 2020 by financetwitter

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