They say this group, which is already paying higher taxes, cannot be asked to bear the burden of increasing the savings of 50% of the 15 million members who have withdrawn much of their savings, leaving less than RM10,000 in their accounts.
Director of the Institute of Malaysian and International Studies at Universiti Kebangsaan Malaysia, Sufian Jusoh, who specialises in development economics said the government would be seen as unfair for putting the burden on this group of Malaysians.
The government must be responsible for ensuring a proper social security net for the B40 and lower M40 category of citizens.
“This group (high-income earners) will obviously start taking their funds out, which will affect EPF investments.
“When you allow members to keep on withdrawing under special schemes, eventually the state will face a huge burden with the retirees not having enough to survive,” he told FMT.
Last week, in pushing for another iCitra EPF withdrawal of RM10,000, Najib Razak proposed the fund introduce a multi-tiered dividend payout, among others.
This means those with lower savings get a higher percentage while those with higher savings will get a lower percentage.
Sufian said this may result in the majority of retirees not having enough to cope, which means the state will have to step in by giving out more aid regularly, leading it to become a welfare state.
“This also means the government will be forced to increase taxes while salaries in Malaysia are still relatively low. When this happens, investors may shy away and I dread to think what will happen to the economy.”
He said the authorities needed to come up with more creative ways to aid the 50% of EPF members with very low savings, which has been made worse by allowing special withdrawals.
“First of all, they should stop the special withdrawals which is a populist move advocated by politicians.”
A former senior EPF official warned that if the EPF “tap is not closed”, the consequences are going to be dire for the government, saying this is dismantling what the founders of the scheme had built over the years.
“At one time, EPF was the seventh largest retirement fund in the world, with even developing nations coming over to learn how we were managing it.”
Requesting anonymity, the economist said those with higher savings, who are already paying higher taxes and contributing big amounts for EPF to invest, will not accept the multi-tiered proposal lying down.
“They are going to take all their money out and look at options, including overseas investments. And you cannot blame them as they are already paying high taxes.
“If this happens, the result is a no-brainer actually,” he said, adding that according to figures, 10% of the members own 40% of the funds totalling some RM890 billion.
He said it had been proven all over the world that only forced savings in retirement funds can help the aged after they retire, as most do not see its benefits when they are young.
He said it was also disturbing that the withdrawals exceeded the contributions for the first time in 20 years by RM58 billion last year.
“The board also had to bring back RM20 billion of its investments abroad last year to help with its liquidity.
“While these may not have a short-term impact, with so much uncertainty, EPF ought to plan its strategies carefully,” he said.