PETALING JAYA,Feb 18: Experts are cautioning contributors against withdrawing their money from the Employees Provident Fund (EPF) through the i-Sinar scheme even though all conditions for withdrawals have been lifted.
Financial planner Robert Foo from MyFP said most Malaysians lacked even a basic “kitchen table” financial plan and, as such, it was best not to withdraw their EPF savings.
“Yes, now, with i-Sinar, you can withdraw. But the question is, do you need to withdraw?”
He suggested that people withdraw money only if they intended to invest, but not to spend.
It would be better if they could talk to a financial adviser who would look at their balance sheet and offer sound advice, he said, adding that it was important to have enough money to last throughout their retirement.
Geoffrey Williams, an economist from Malaysia University of Science and Technology, said with EPF lifting all its criteria for Account-1 withdrawals, there may be a significant rise in personal debt defaults and deepening social problems due to debt distress. There may also be a rise in illegal debt providers.
Williams noted that many EPF members aged 26 to 55 in the B40 and M40 income groups that were polled in a recent survey by UCSI Poll Research Centre reported that they would use their withdrawals for loan repayments.
He said this suggested that this group had an urgent debt problem.
“Only 48.6% of respondents used the money for food and groceries,” he said, adding that this was of concern as they might end up using credit cards for food and groceries in future. “Then, they will have no more EPF savings to pay off this (credit card) debt.
“Last year, finance minister Tengku Zafrul Aziz said that 42% of EPF contributors had less than RM5,000 in their Account-1, with 32% of that group having RM1,000 or less.
“According to EPF data, 65% of contributors below 55 years old had less than RM50,000 in savings. Around 60% of retirees used up all their savings within three years of retiring.”
He said it was, therefore, more than likely that most of the B40 and M40 account holders would have fully depleted their accounts by now.
“This extension of scope will just make things worse and more people will wind-up without any savings for retirement. They need direct cash allocations and they should not be asked to deplete what little savings they have,” he said.
The government has done away with conditions on withdrawals for the i-Sinar scheme under the EPF, allowing EPF members with a balance of less than RM100,000 to withdraw up to RM10,000.
However, the withdrawals will be disbursed in stages over a maximum of six months.