Malaysia's Employees Provident Fund, the backbone of the country's social safety net, warned Sunday that the more than 100 billion ringgit of "exceptional" retirement savings drawdowns allowed since the COVID-19 pandemic erupted in March 2020 has left a majority of EPF members with accounts too depleted to avoid poverty in retirement.
An announcement by the 989.1 billion ringgit ($238.6 billion) national defined contribution system said that three programs introduced to allow withdrawals during that span have seen 101 billion ringgit disbursed to over 7.4 million EPF members — close to half of the fund's total membership.
Now, 6.1 million members have less than 10,000 ringgit in their EPF accounts while 3.6 million have less than 1,000 ringgit, "leaving them vulnerable and unprotected for their retirement," the announcement said.
An EPF spokeswoman didn't respond to requests for comparison figures from before the pandemic.
The EPF estimated that by year's end only 27% of members will remain on course to meet the "basic savings" threshold of 240,000 ringgit by the time they reach 55, leaving just under "three-quarters of members in a serious state of having inadequate funds to retire above the poverty line," the news release said.
As of Dec. 31, the EPF estimated that 36% of members would be able to meet that threshold.
And in a country where relations among Malaysia's dominant Bumiputera Muslim majority and its sizable Chinese Malaysian and Indian Malaysian minorities have remained stubbornly fraught, the details of those EPF drawdowns could prove politically challenging.
"The drop in savings is particularly worrying for Bumiputera members, as they made up 78% or more than three-quarters of the withdrawal applicants," the news release said, adding: "as a result, 4.4 million or 54% (of) Bumiputera members now have less than 10,000 ringgit, and 2 million or 25% have less than 1,000 ringgit."
In addition, the news release said, "the distribution of savings has become increasingly skewed."
The bottom 40% of EPF members saw their savings plunge 38% from the year before to just 8 billion ringgit, "translating into a median savings balance of 1,005 ringgit," while the middle 40% experienced a drop of 18% to 155 billion ringgit, or a median balance of 24,995 ringgit. The top 20%, meanwhile, saw an increase in their savings, the news release said, without providing further details.
"The EPF estimates that members will need to work between an extra four to six years to rebuild the savings that have been utilized during the pandemic," the news release said.
After roughly a year and a half of effectively supporting whatever the government proposed in the way of tapping retirement savings to support Malaysia's pandemic-stricken economy, the EPF's latest announcements have grown increasingly somber. The announcement Sunday said against the need "to safeguard members' future and rebuild their retirement funds, future exceptional withdrawals will need to be very carefully considered."
But in a potential case of mixed messaging, a separate EPF news release Oct. 29 regarding the Malaysian government's budget for 2022 welcomed the decision to keep employees' mandatory EPF contributions at 9% of monthly salaries — down from a statutory rate of 11% — for six more months through June 2022.
Amir Hamzah Azizan, CEO of EPF, said the move "should come as a relief as it helps to increase employee's take-home salary and ease financial hardship."
Sunday's news release closed by noting that the Malaysian Social Protection Council, chaired by Prime Minister Ismail Sabri Yaakob, "is currently looking at fundamental reforms to the nation's social protection system."
