THE Malaysian Financial Planning Council (MFPC) expressed support for the Government’s decision against further withdrawals from the Employees Provident Fund (EPF).
“While we empathise with the rakyat’s struggles during these hard times, further withdrawals from their retirement nest egg may cause bigger problems in the future particularly after retirement,” it said.
“Having a retirement fund is crucial for our and our family’s financial and emotional wellbeing, and this underscores the importance of having adequate savings and income for future security as well as to withstand any further financial shocks.”
According to the financial planning council, mandatory EPF contribution represents the main pillar in the rakyat’s financial old age security.
With more than 14 million Malaysians relying on EPF as their safety net in their old age, the approach of using EPF savings for emergency needs will cause severe impact as members face very low savings in their retirement years, compounded by other uncertainties such as rising healthcare costs, it added.
“The issue of insufficient savings is at an alarming stage as the median savings of the B40 group is at RM1,000 and if this level continues until their retirement, they would have only RM4 a month to spend for 20 years.
“Meanwhile for the M40 group, their savings of RM25,000 would translate to RM104 a month for the same period.”
In view of the fact that compulsory EFP savings are clearly not sufficient for many contributors to survive during their retirement years, MFPC encouraged initiatives to encourage and offer incentives for long-term saving through the Private Retirement Scheme (PRS) which would help ameliorate the issue of insufficient retirement funds.
“To exacerbate the challenges, Malaysia’s changing demographics means that our citizens will live longer, with life expectancy expected to increase to 80 years.
“We are fast approaching becoming an ageing nation as people aged 60 and above will comprise 15% of our total population by 2030, just eight years.
“Further, about 40% of the Malaysian population is estimated to be uncovered by any form of social protection and expected to face insufficient funds for retirement. We could be walking into a ‘retirement crisis’,” it noted.
Poor financial literacy among Malaysians
MFPC’s 2020 study on Financial Capability and Utilisation of Financial Advisory Services in Malaysia revealed that an alarming number of Malaysians generally have low financial capability, do not know how to manage their money and do not plan ahead and save.
According to the study, poor financial literacy among Malaysians is one of the main reasons for the low savings of around 36% of Malaysians surveyed.
“The lack of financial literacy could leave the next generation of retirees significantly poorer and sicker due to not having enough savings to afford proper healthcare,” said MFPC.
“It creates the risk of a ‘lost generation’ of older people entering retirement in poor health and without enough money as support.”
At this point, MFPC pointed out that taking the appropriate actions is imperative.
“To augment the efforts of the Government’s and various authorities, we urge financial institutions to upgrade their financial intermediaries including bankers, unit trust consultants and insurance agents in professional knowledge to provide Malaysians with the critically-needed retirement planning advisory services.
“We are confident our collective collaborative initiatives will benefit Malaysians in looking forward to a financially secure and stress-free retirement and old age.” – Jan 10, 2022
