MTUC president Effendy Abdul Ghani said he was concerned that those who do so will struggle to keep up with loan repayments as the banks’ interest rates will be higher than EPF dividends.
“We hope the government will reconsider the proposal and present a more sustainable and people-friendly policy – which will get them out of debt instead of driving them into debt,” he told FMT.
Effendy, who heads a union representing 16.5 million workers, said it would be better for the government to channel more money to the EPF through investments and share the profits with the people.
He said a long-term solution was to study the implementation of cost of living allowances (Cola) and pensions for private sector workers to reduce their living expenses.
Effendy said it was crucial the country has a progressive wage mechanism that takes into account the living wage.
On Thursday, Anwar announced that the government is considering allowing those struggling with their finances to use their EPF savings as collateral for emergency loans.
He said this following repeated calls from the opposition and other groups to allow further withdrawals.
Four tranches of EPF withdrawals were allowed in the past two years because of the effects of the Covid-19 pandemic. An EPF withdrawal of up to RM10,000 was allowed last year, following the i-Lestari and i-Sinar schemes in 2020, and i-Citra in July 2021.
Faced with criticism, Anwar, who is also the finance minister, said that the latest initiative was targeted at EPF contributors who have large savings but are facing financial difficulties.
Effendy, however, said that senior citizens make up the biggest group of contributors who have sizable EPF savings, adding that he did not see how Anwar’s proposal will help this group.
“The lack of focus on future planning as an aging country is something we need to prioritise for the sake of the people and the economy,” he said.
“When we allow workers to use their EPF savings as collateral, we encourage them to compromise their future security for current needs.”
Pointing out that EPF savings are protected from bankruptcy proceedings according to Section 51 of the EPF Act, Effendy questioned what would happen to those who are unable to repay their loans after having used their savings as collateral.
“If the debtor fails to repay the loan, what should they do? Can they delay their loan repayments?” he said.
“Who can the bank claim from? Don’t tell me they’ll claim from the government. That’s not fair.”