Help contributors replenish savings after economy recovers

THE Government should come up with plans to replenish contributors’ savings in the Employees Provident Fund (EPF) once the economy recovers.

“One of the ways we can help contributors in the future is to have differential returns for those with difference income brackets.

Prof Yeah Kim Leng

“It means EPF may want to consider giving higher dividends for those having lower cumulative savings in their accounts.

“I did suggest the idea to them in the past but it was not taken up,” Sunway University Business School Professor Prof Yeah Kim Leng told FocusM.

Yesterday, EPF announced that those lost their jobs or had their incomes cut due to the economic downturn can start applying to withdraw money from their Account 1, called the i-Sinar programme.

The programme will be divided into two categories.

For Category 1, the eligible people include those who work in the formal sector, self-employed, gig worker, those who have not contributed for a long time, those who have lost their jobs, housewives or those who have been given unpaid leave notice.

The criteria for Category 1 are members who have no contribution with the EPF for at least two months consecutively during application and members who are still working, but have experienced a reduction in basic salary by 30% and above after March.

Category 2 includes those who are still employed but have experienced an overall income reduction of 30% and above (including reduction in salaries and allowances, or deduction of overtime work claims) after March, for which contributors must provide supporting documents.

No supporting document is required for Category 1 and it will be approved automatically based on EPF internal data. Contributors can start applying from Dec 21 and funds will be disbursed in January.

Acknowledging it was tough call due to unprecedented times, Yeah said the Government must consider the long-term financial health of EPF contributors, especially after retirement.

“Another thing that needs to be done is, of course, by increasing the wages of employees, which in turn, would allow the latter to contribute more to EPF,” he said.

The seasoned economist added that contributors also need to get creative and try to earn passive income for wealth accumulation.

On queries that some companies have strict regulations against employees moonlighting for passive income, Yeah said the establishments need to offer some flexibility to its staff.

“As long as their employees’ productivity is not affected by moonlighting, we can offer them some leeway,” he said.

The best move, Yeah added, was for employers to start offering a standard living wage for all its employees so everyone can lead a better quality of life.

“The measure can be tied to the firm’s corporate social responsibility programme. The company board must be sensitised on the huge wage imbalance that we have in our country.

“Of course, we need to tie these measures with productivity and profitability,” he said.

Eventually, Yeah added, the Government may need to consider extending the retirement age as people are living longer due to healthy lifestyle.

“We may have to look into extending the retirement age to 65 like many other nations. In fact, even China is looking into the matter now,” he added.

Social Economic Research Centre (SERC) executive director Lee Heng Guie urged contributors to think carefully before withdrawing money from Account 1.

“They must understand that with lower savings, their dividends will get affected. I understand that some may be looking at short-term financial gains due to the economic crisis.

Lee Heng Guie

“At the end, it’s up the individuals to weigh its pros and cons,” he said.

On how the Government can help replenish the used funds, Lee said that he sees no other option but for the employers to raise salaries.

“But that is also difficult given the economic situation. The other option is for workers to diversify their savings like investing in the Private Retirement Scheme (PRS).

“We need to look into changing our lifestyle too. We cannot be doing the same things after getting a pay cut.

“So, please do get advice from certified financial planners on how to manage finances now,” Lee added. – Dec 3, 2020.

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