Income inequality causing low EPF savings

LOW wages and paltry contribution to the Employees Provident Fund (EPF) is causing depositors to having low savings in the pensions fund to sustain their retirement.

Speaking to FocusM, Parliamentary Select Committee for International Relations and Trade chairman Wong Chen said while pensions saving as a percentage may be acceptable, the actual quantum for most deposits was insufficient.

“I understand that most depositors don’t have enough savings to sustain their lifestyle, post retirement. It lasts for only about two to five years,” he said.

Yesterday, EPF chief executive officer Alizakri Alias told Astro Awani that 71% of its contributors have less than RM50,000 in their savings.

“On average, our contributors have about RM47,000 in Account 1. For those who are below 30 years of age, they only have about RM10,000 in Account 1.

“It’s not really that much but if we add it with the sum in Account 2, our contributors have about RM13,000. For those below 30 years of age, they only have about RM4,000 in Account 2.

“So, their savings are not that much. On average, they only have about RM208 to spend monthly if they live for another 20 years after retirement,” he was reported saying.

Recently, Umno had suggested the Government to allow contributors to withdraw up to RM10,000 from Account 1, to ease the people’s burden following the COVID-19 pandemic.

To remedy the situation, Wong Chen noted that employers need to offer better wages to their staff and start profit sharing schemes.

“Employers need to learn to share the profits earned. Better wages and more active employee share schemes is the way forward,” he added.

The PKR member of Parliament opined that Malaysia could learn from Singapore on how to offer better wages, which includes a mix of market forces and government regulation.

“In the long run, employers must learn to incentivise workers with shares if they cannot afford to pay high wages. These shares are a form of savings and can result in higher productivity,” Wong Chen remarked.

On Umno’s suggestion of allowing Account 1 withdrawal, the Subang parliamentarian said it should be discouraged as the move would diminish contributors’ retirement fund.

“If truly needed, we can cap it to a maximum of 10% of the funds. However, I feel it is the Government’s duty to the taxpayers to resolve the pandemic issue.

“Besides, the Government has the capacity to raise more bonds in this extraordinary time.”

Wong Chen went on to say, “If the Government does approve Account 1 withdrawals, then it should look into ways on how to replenish depositors’ savings after the pandemic.” – Nov 1, 2020




Subscribe and get top news delivered to your Inbox everyday for FREE