EPF proposals well received, more needed for retirement
KUCHING: Financial experts and advisers view the proposal to raise the withdrawal age of the employees provident fund (EPF) is a ‘lauded move’ as it addresses the issue of retirees not having enough money to live comfortably during their golden years.
Iris Lee, editor of iMoney, a financial service comparison service understood that the EPF’s proposal was to help address the issues with its member retiring without enough funds.
“Their heart was in the right place but the execution was definitely too jarring for their members,” she told The Borneo Post via email.
“While the Prime Minister’s move to retain the status quo is definitely the right (and most popular) move, it doesn’t address the real problem – that too many Malaysians are hitting retirement without enough money.”
Standard Financial Adviser Sdn Bhd’s licensed financial adviser representative and director of advisory and practice management, Lee Khee Chuan and associate financial adviser Eno Wong said the proposal to raise the EPF withdrawal age is ;noble’ because statistics coming out from EPF is quite worrying.
“Now, only one in four of active age 54 EPF members have RM196,800 or more in their EPF account, the minimum basic sum recommended by EPF for retirement,” they pointed out to The Borneo Post.
They further explained that at RM196,000, it is not enough for a retiree to go far.
Khee Chuan and Wong noted that this is also assuming that the retiree is disciplined, budget conscious, and able to ward off all pressure from overspending or spending on expenses such as house renovation, expensive holidays, and others, or avoid investments in risky funds or schemes. However, there are still factors to consider when it comes to changing the withdrawal age of EPF.
Iris from iMoney pointed out that changing the withdrawal age of EPF could derail a person’s carefully-mapped retirement plan.
“However, if a person is planning for an early retirement, this will completely throw his/her original plan out the window as EPF makes up the biggest part of one’s retirement savings,” Iris noted.
Nevetherless, she pointed out that the first proposal could work, as the younger people in the workforce can still adjust their retirement plan to fit the new ruling.
Still, she stressed, for employees with more labourous jobs, this proposal might not be ideal for them as they might not be able to continue working pass 55, or they might not even be able to find a job after a certain age.
“Not having an income and not being able to access their retirement savings can definitely be harsh on his/her financial situation,” she said.
As for the second proposal EPF presented, which is to align the minimum contributions with the minimum wage legislation, it might not be effective now as a lot of Malaysians are still finding it hard to cope with the rising cost of living.
“By taking away more from their monthly salary for EPF can be painful on their monthly income,” she added.
As for the third proposal, which is to extend the dividend payments for those who choose to keep their money with the fund, from age 75 to 100, Iris said it might not be “attractive to most” as with the average life expectancy of Malaysians at 75 years old (according to UNICEF’s stats in 2012), it is safe to say that not many will live to see their dividends at 100 years old.
“The fourth proposal just gives EPF members another option to invest their EPF savings, but the returns may not be the same,” she added.
Overall, Iris said to address the issue of not having enough funds for retirement, private retirement schemes (PRS) and EPF should work together to solve this issue instead of working independently to solve the problem.
As Prime Minister Datuk Seri Najib Tun Razak has officially announced that the withdrawal age would be retained at 55, Lee and Wong advised, retirees should be serious in making sure that their retirement nest eggs are secured.
They also cautioned retirees to be aware of businesses looking to leverage on their retirement funds and as such, they advised retirees to seek independent financial advisers who will be more neutral n objective in their recommendations since they are not tied to a particular financial product manufacturer.
“One should bear in mind that if a retiree loses the retirement nest egg, there is no more time to recover from investment losses,” Lee and Wong stressed.
Meanwhile, Sarawak trade unions Malaysian Trade Union Congress (Sarawak division) and Sarawak Bank Employees Union (SBEU) are in favour of the proposal to lift the age of EPF withdrawal to 60.
“The fact that most of us want to withdraw as early as possible does not mean it is the right thing to do. We cannot depend on our children as they can hardly make ends meet, neither should we depend on BR1M,” Andrew Lo, secretary-general of MTUC Sarawak said in a text message.
“Old age financial protection is a serious matter. We must approach it in a rational and holistic manner, and we must display responsible leadership on the issue. We cannot decide by MOB rule,” he added.
SBEU secretary-general Law Kiat Min has stated that early withdrawal of EPF could be a problem for retirees as “quite a lot of us make emotional decisions when it comes to our own money and are our own worse enemy”.
He also said withdrawing early could mean that employers do not have to contribute and therefore, do not have to increase their contributions to the fund, hence a lower savings fund.
Sharing MTUC Sarawak’s view, he also pointed out that old age financial protection is a serious matter and should be addressed rationally.
Source :[ The Borneo Post ]