Account 1 withdrawal: Offer interest free loans instead!

OFFER interest free loans to those affected by the COVID-19 pandemic instead of allowing withdrawal from their Employees Provident Fund (EPF) Account 1.

Speaking to FocusM, senior fellow and director of the Economic Studies Programme at the Jeffrey Cheah Institute on Southeast Asia at Sunway University, Yeah Kim Leng said the Government can also increase the pay out under the Bantuan Sara Hidup (BSH) and Bantuan Prihatin Rakyat (BPR) to ease the people’s burden during the pandemic.

“The Government can increase the aid payments to up to RM1,500, especially for the low-income earners. We can also dish out food coupons. Direct cash aid is the way to go at this juncture.

“As for the loan, borrowers can slowly pay back once the economy improves. This will also help them to practise budget discipline,” he said.

Last week, Finance Minister Tengku Zafrul Abdul Aziz tabled Budget 2021 at the Dewan Rakyat, worth RM322.54 bil.

The expansive budget was an addition to the six stimulus packages worth over RM300 bil announced this year, aimed at reviving the economy and push assistance towards those affected by the COVID-19 pandemic.

He also announced that the Government will allow Account 1 withdrawals by contributors, a maximum of RM500 monthly for the next six months. The maximum amount of withdrawal allowed is RM6,000.

Many quarters have panned the idea, citing data by the EPF itself saying that a lot of contributors do not have enough savings in the pensions fund as it is.

The statement was confirmed by Tengku Zafrul himself yesterday in an interview with TV3, saying 32% of EPF contributors have less than RM5,000 in their Account 1, with another 10% are only having between RM5,000 and RM10,000.

Acknowledging the Government’s intention in trying to help the public, Yeah said it was better for the people to retain their savings in EPF, adding the pensions fund offer high dividends for its contributors.

“If needed, we can allow those from the M40 group and above to withdraw money from Account 1,” said Yeah.

On why the Government came up with the idea despite knowing the low savings, the senior economist said it was important to consult all stakeholders before making such decision.

“This is why information should have been released earlier to the public. We need to make evidence-based decisions in the future,” noted Yeah.

Crewstone International chairman Datuk Jalilah Baba said there may be discrepancies in the figures mentioned by the minister.

“The Government’s intention is good as many are suffering due to job loss and income reduction but we must consider the fact that many don’t have enough savings,” she said.

Whether the Government should call off the proposal, Jalilah urged caution on the matter.

“Maybe we can allow only a certain percentage from Account 1 to be withdrawn instead of the current quantum,” she said.– Nov 10, 2020


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