EPF’s plan to revise the retirement system to use part of members’ savings for monthly withdrawals after they retire has raised quite a few eyebrows.

The plan, if implemented, would be mandatory, as all members above 55 years old already have this withdrawal option under the current EPF regulations.

However, the response to this scheme has been extremely poor. In 2022, only about 7,000 members voluntarily chose this monthly withdrawal. There are 15.8 million EPF contributors currently.

Under the new proposal which is in its infancy, EPF is planning to make it mandatory for a certain portion of members’ savings to be withdrawn every month, based on a formula. Only the remainder can be withdrawn in one lump sum or periodically as and when the member chooses.

Honestly, it’s not going to be a walk in the park for EPF to implement this. The moment the government talks of tweaking rules on withdrawals, everyone jumps even before hearing out the actual plans and its motive.

Obviously, the reason for this is the huge trust deficit when it comes to EPF. One might think this is not fair at all but I guess some past actions that saw the government using EPF funds for questionable reasons have put Malaysians on a defensive mode.

At one time, a suggestion to allow retirees to only take out their whole savings when they reach 60 instead of 55 was met with much anger and opposition. EPF made this proposal after Malaysia raised its mandatory retirement age to 60 in 2012, but the withdrawal plan never materialised.

Each time EPF proposes plans to “force” members to keep their savings for a longer period with the fund, rumours start flying with claims that the government is short of money or that it’s using the funds to bail out cronies.

If one cares to look deeply into the EPF balances of members, mandating monthly withdrawals sounds rational especially with an ageing population. With most of them without any regular post-retirement income, this will actually achieve a more consistent stipend once they stop earning.

Look at this EPF data, for example. About 52% of members have less than RM10,000 in their accounts, while 27% have less than RM1,000. Meanwhile, about 56% of contributors, who are at the age of 54, only have less than RM50,000.

This amount can only sustain them for a little over four years, assuming that they only spend RM1,000 per month. So how can EPF possibly ask this lot to opt for its plan for monthly withdrawals?

The only group who has enough for the monthly withdrawals could be those with high savings. But these are exactly the ones who appear to be responsible enough to plan their finances for their retirement, so they don’t need this scheme.

Under these circumstances, enforcing mandatory monthly withdrawals is not likely to go down well with most members as they will be forced to retain a percentage of their savings in EPF after reaching 60. They fear losing the liberty to decide when to take out all their hard-earned savings in one lump sum.

All they want is absolute control of their savings and not to be told by politicians or the government on how they should spend their money. A small number of members have even chosen to keep their savings in EPF long after their retirement as the returns are much higher.

Some have also started transferring their fixed deposits in banks to EPF as the annual returns are much higher. But this luxury can only be enjoyed by a small number of Malaysians who have lots of cash to spare. Most private sector retirees struggle after becoming senior citizens and the number is growing.

Over the past few years, only EPF has consistently expressed worry over the failing old age security for Malaysians. It has reminded the government time again that the social well-being in Malaysia has reached a critical juncture where protection is currently too narrow.

But because of political expediency, all the last four governments did not pay much heed to EPF’s warnings that millions of them could end up with zero savings shortly after 60 at the rate members have been making withdrawals. This includes the four special Covid-19 withdrawals besides those taken out for health, education and investment.

EPF CEO Amir Hamzah Azizan was spot on when he said at a recent conference that the government needs to find solutions to create a society that not only prioritises economic growth and material prosperity, but also places paramount importance on social well-being. Malaysians have a duty to hear him out.

He said EPF believes that this transition is necessary following the increase in Malaysian life expectancy from 54 years to 75 years today. The aim of implementing this change is to prevent elderly individuals from falling into poverty during their retirement years.

However, Amir Hamzah admitted that this suggestion will involve generational changes that would take some time to be enforced. Can’t agree more with him as the saving habit of most Malaysians, especially the current generation, is pathetic.

The general feeling is that the time has come to tweak the post-retirement options in EPF to help the poorer retirees who happen to be the majority. It’s obviously not going to be easy because Malaysians want EPF changes, if any, to remain voluntary as they say the money belongs to them.

Maybe the plan to make it compulsory should be announced with a lead time of at least five years. Forcing any plan on EPF members without adequate preparation is bound to cause repercussions, which will definitely affect the government of the day.

Whoever rules, they must tread with caution.

The views expressed are those of the writer and do not necessarily reflect those of FMT.