5.2 per cent EPF dividend within expectation, says MTUC Sarawak secretary
KUCHING: The declaration by Employees Provident Fund (EPF) of a 5.2 per cent dividend for conventional savings is within expectation and praiseworthy given the global Covid-19 pandemic, said Malaysian Trades Union Congress (MTUC) Sarawak secretary Andrew Lo.
“However, our very concerns remained that some 30 per cent or about 1.6 million of its members may withdraw almost all of their savings from Account 1 while another 60 per cent or three million members ‘have or will use up all savings in Account 2’ as revealed by EPF,” he said in a statement yesterday.
He pointed out that though the EPF’s total investment assets stood at RM998 billion at the end of 2020, the average savings of its members were well below the amount needed to have a sustainable retirement.
“We remind again that workers in the private sector do not have a pension and EPF remains their only source of post-retirement income,” he said.
Lo said some RM130 billion in funds had been or were still being released to members and employers via various schemes to alleviate Covid-19 related hardships since last year.
“The RM130 billion includes an estimated RM90 billion for i-Sinar Account 1 withdrawals;
RM20 billion from the i-Lestari Account 2 withdrawals; RM13.6 billion from the reduction in contribution rates that increased its members’ disposable incomes; and RM85 million in deferred contributions for employers seeking respite in terms of cash flow,” he said.
He also noted that there has been reduction in contribution rates even before the Covid-19 pandemic.
“While the aim is to enable members to have more disposable income, and to increase domestic consumption, we suspect that most of the withdrawals may be used by contributors to pay off borrowings.
“This means that the increase in consumption may not be significant,” he said.
With increased withdrawals and reduced contributions, Lo said it is no surprise that the savings adequacy of more of EPF members are expected to deteriorate further as Malaysians aspire to be rich before they get old.
“It seems that for most of us, we get old without getting rich.
“The EPF, being a 70-year-old institution and one of the oldest pension funds in the world, must remain focused on its mandate to help members have enough savings for a sustainable retirement,” he said.