PETALING JAYA: Malaysians with inadequate savings in their Employees Provident Fund (EPF) must take proactive measures to increase it for their future well-being, said Consumers Association of Penang (CAP) president Mohideen Abdul Kader, who added that it is critical for them to break their behaviour of making EPF withdrawals whenever they face financial problems.
He said the government is already providing RM500 per person to the low-income group to top up their EPF savings.
“This goodwill gesture will provide some help, but the people must find ways to increase their monthly savings no matter how little they can put aside.
“It is a known fact that those in the B40 group are facing tough times and have little money to spare. They have to find it within themselves to increase their savings.”
He said one major issue in the country was the over-reliance on (cheap) foreign labour, which keeps the salaries of Malaysians low.
Mohideen said employers only share about 35% of their profits with their workers whereas in other countries, it can be as high as 50%.
He said a key reason for poor salaries was low productivity among Malaysian workers, adding that to overcome this, employers and the government need to work together to raise wages.
Mohideen also said the nation could then wean itself off foreign workers and rely on locals, but it is not going to happen overnight.
“As productivity rises, so will their salaries, and this will help them increase their EPF savings in the long term.”
He said employers should share more of their wealth with their workers, especially considering the increasing cost of living.
He also called on the government to provide a mechanism to help the people obtain credit to tide them over during hard times.
Prime Minister Datuk Seri Anwar Ibrahim announced in his 2023 Budget speech that the government will contribute RM500 to the EPF Account 1 of contributors aged between 40 and 54 who have less than RM10,000 in EPF savings. This will cost the government RM1 billion.
Anwar said the government is committed to helping the people rebuild their savings after they made four withdrawals during the Covid-19 pandemic.
Universiti Tun Abdul Razak economist Prof Emeritus Dr Barjoyai Bardai said one of the main issues for B40 Malaysians is their inability to save because of their financial constraints.
He said the government’s assistance to the low-income group by topping up their EPF savings by RM500 will grow to RM1,300 over 15 years.
“A better method would be to get EPF to provide these contributors with loans they cannot withdraw and at low-interest rates.
“This means that an RM100,000 loan at 2% interest, for example, would increase an EPF contributor’s savings by RM4,000 due to the compounding effect, provided the dividend payout is 6% per annum, from which 2% will be deducted by EPF as loan interest.”
Barjoyai said the government is aware that most individuals in the lower-income group want to make another EPF withdrawal, but that would deplete their savings and they would have nothing in their old age.
He said the RM500 contribution serves to encourage people not to touch their EPF savings.
Barjoyai added that salaries in Malaysia were very low, and he concurred with Mohideen that one of the reasons for the situation is low productivity.
He called on employers to help reskill their workers so they could earn higher salaries.
“With reskilled workers, even employers will benefit and they can bring in more high-tech equipment. As of today, about 10 million Malaysian workers are unskilled.
“This has an impact on the national economy and the salaries of workers.”
