BUDGET 2022 which focuses on the Malaysian family during these complicated times strives to be all inclusive to cater to the needs of Malaysians of all walks of life and as a relief from the impacts of the COVID-19 pandemic.
The Malaysian Financial Planning Council (MFPC) wishes to highlight the following pertinent ways an individual can enhance their financial wellbeing by considering some of the measures announced particularly under the first objective of the budget that focuses on the rakyat’s wellbeing.
Direct Financial Assistance
Cash aid under Bantuan Keluarga Malaysia (BKM) must be utilised by an individual and household by being prudent and frugal.
The pandemic has sent a clear message that the savings threshold of Malaysians is low.
Malaysians must be reminded of the need to allocate a portion of their earnings to their savings fund.
Based on World Bank Data, Malaysians saving rate was at 26.12% (% of GDP) in the year 2020.
The personal savings rate is the clearest sign of an individual’s financial health and one must be made aware of protecting their financial nest to attain financial wellbeing starts with better savings behaviour.
Financial wellbeing is the most important component of wellbeing.
Thus, assistance through JaminKerja for example will reset employment income for the many who have been out of jobs due to the pandemic.
Tax Reliefs
The intention of the Government in providing tax relief for upskilling programmes which also includes our Registered Financial Planner/Shariah Registered Financial Planner programmes augurs well of financial planning as a key life skill for Malaysians of all walks of life.
A programme on financial planning will help prospective participants learn how to manage their finances better.
The tax relief measure to undertake the study of the programme will be further encouragement for individuals and employers.
Interestingly, the Council’s basic free financial literacy programme My Money and Me and our other professional programmes saw stronger enrolment numbers during the pandemic.
This indicated that a higher degree of awareness on the need for better financial management was an after-effect of the pandemic.
Retirement Savings
The withdrawal options which had to be made available during the pandemic as many Malaysians suffered with everyday living needs challenges has further caused a strain on individuals retirement threshold.
As such the widening of the scheme to include gig economy workers is something we view very positively.
In addition, the prolonging of the tax exemption of RM3,000 for the Private Retirement Scheme until the year 2025 helps an individual save for their retirement and be rewarded by a yearly tax-deductible amount.
The effect of compounding interest will ensure an individual would be able to have a more comfortable retirement.
We advocate that Malaysians who have made such withdrawals from their retirement kitty during the pandemic replenish their savings rate by opting for voluntary replenishment (up to RM60,000 is permitted per year) as the normalcy of their income returns.
This actionable solution will help an individual’s longer-term financial wellbeing.
The Retirement Advisory Service (RAS) is available at all Employees Provident Fund (EPF) branches, by individuals holding the RFP/Shariah RFP designation with the intention of advising individuals on the best approach on their retirement savings.
The Government’s decision to prolong the reduction of EPF Contribution Rate from 11% to 9% is intended for a certain segment of rakyat who are still facing a reduction of income.
However, financial wellbeing can best happen in an individual’s life through the optimisation of resources.
In this regard, retirement savings under the EPF can be invested through Members Investment Scheme (MIS) for potentially higher returns, one of the ways of replenishment of an individual’s retirement savings rate.
Financial literacy is a combination of financial knowledge, awareness and skills.
Key to achieving financial wellbeing is to be equipped with the know-how of money management which is seriously lacking in the lives of the rakyat.
As an individual’s financial behaviour will be key in determining financial wellbeing, we urge all Malaysians to take the necessary steps in planning their finances. – Nov 2, 2021
MFPC is an independent body set up with the objective of promoting nationwide development and enhancement of the financial planning profession.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
