Established in 1951, the Employees Provident Fund (EPF) helps the Malaysian workforce in the private sector to save for their retirement. Due to its importance in ensuring a decent quality of life after retiring, funds in the EPF used to be untouchable until one reaches a certain age. The rule was revamped in 2007 to allow withdrawal from account 2 to pay for certain expenses. Starting from 11 May this year, a further restructuring saw the creation of account 3, where savings in this flexible account can be withdrawn at any time according to members’ needs.
While the restructuring allows EPF contributors more flexibility to manage their overall financial well-being, it requires more discipline from the contributors. Already, 40% of the EPF members have average savings of less than RM2,000 in their accounts and 80% have less than RM30,000. Clearly, these amounts are not sufficient to support any form of retirement. For a majority of Malaysians, money in the EPF represents the only savings they have after retirement. Given that having financial discipline is not a quality that most Malaysians possess, the creation of the flexible account could put many Malaysians in poverty after retirement.
While the restructuring allows EPF contributors more flexibility to manage their overall financial well-being, it requires more discipline from the contributors. Already, 40% of the EPF members have average savings of less than RM2,000 in their accounts and 80% have less than RM30,000. Clearly, these amounts are not sufficient to support any form of retirement. For a majority of Malaysians, money in the EPF represents the only savings they have after retirement. Given that having financial discipline is not a quality that most Malaysians possess, the creation of the flexible account could put many Malaysians in poverty after retirement.
