Fariq Sazuki, from the Bait al-Amanah think tank, also tied the spike to benefits attached to the i-Saraan scheme, a voluntary contribution programme for self-employed and casual workers who do not earn a fixed income.
Contributors under the i-Saraan scheme receive a special incentive of 20% of their total voluntary contributions in a year from the government subject to a maximum of RM500.
On Monday, FMT reported that over 1.2 million EPF members made RM13 billion in voluntary contributions last year, with an official attributing the numbers to the pension fund’s steady dividend rates.
“As long as the government has the funds to implement this (i-Saraan scheme), voluntary EPF contributions will continue to expand steadily, especially among informal sector workers and the self-employed,” Fariq told FMT.
“In a way, EPF needs to consistently outperform inflation in order to ensure confidence among members to keep contributing voluntarily,” he said, adding that stagnant wages and a rise in the cost of living would hamper voluntary contributions.
Fariq also said EPF’s Account 3, which allows members to access their savings for short-term financial needs, was another possible reason why the pension fund was able to attract RM13 billion in voluntary contributions last year.
Another economist, Calvin Cheng, said the growth in voluntary contributions would be dependent on whether the country’s economic conditions can continue to improve and provide higher rates of employment and wages for workers across the country.
Temporary, cyclical and structural factors
Cheng, from the Institute of Strategic & International Studies (ISIS), said that while the RM13 billion figure was encouraging, it reflected a mix of temporary, cyclical and structural factors.
He said incentives from the government to encourage retirement savings, including by matching contributions for the i-Saraan, was a key temporary factor that encouraged voluntary contributions.
Cheng said strong labour market conditions, including higher employment-to-population ratios and pockets of wage growth, were among the cyclical factors.
He distinguished these from structural factors, which refer to shifting attitudes towards retirement savings — particularly among informal and gig workers.
“My sense is that while the figure is a positive indicator, it is likely premature to conclude that it reflects a structural shift in Malaysia’s retirement saving behaviour at a population level,” said Cheng.
“Instead, temporary and cyclical factors are probably the main drivers,” he said.
Cheng said it was important to note that the voluntary contributions are likely coming from those already in a strong financial position and with a greater inclination to save.
“These figures cannot on its own be interpreted as increased retirement adequacy or a true closing of retirement coverage gaps,” he said.
Only small segment of contributors involved
Economist Geoffrey Williams pointed out that while the RM13 billion in voluntary contributions was a large sum, it only made up 1.3% of the EPF’s total fund.
He also said that the 1.2 million voluntary contributors made up less than 10% of all EPF members and only 5% of employees.
“So, still 90-95% are not catching-up to where they should be,” he said.
“EPF gives good returns which are low-risk and far better than a fixed deposit. It is probably the best risk free investment people can make.”