KUCHING: Covid-19 pandemic-related withdrawals amounting to RM145 billion over the last two years have resulted in a significant decline in the median savings of the Employees Provident Fund’s (EPF) Bumiputera and Indian members.
An economist at EPF, who declined to be named, revealed to New Sarawak Tribune that Bumiputera EPF members saw a whopping 70 per cent drop in median savings to RM4,900 as at December 2022, from RM15,500 as at April 2020, while Indian EPF members’ median savings declined 40 per cent to RM14,900 from RM25,700 during the same period.
“The Chinese community is pretty well grounded as they continue to contribute to their retirement savings,” he said.
As of December 2022, Chinese EPF members had a median savings of RM45,200, which represents a 1 per cent decline from the figure of RM45,800 in April 2020.
“It is not feasible for us to permit further withdrawals as the current level of savings has already reached an unsustainable level for certain groups,” he stated.
Regarding income groups, he explained that the median savings of EPF members belonging to the bottom 40 per cent group (B40) were the most severely impacted, decreasing by 70 per cent to RM577 as of December 2022, compared to RM2,434 as of April 2020.
The middle 40 per cent group (M40) was next in line, experiencing a 34 per cent decrease in median savings from RM30,113 in April 2020 to RM19,926 in December 2022.
In contrast, the top 20 per cent group (T20) was able to increase their median savings by 9 per cent to RM152,964 from RM140,440.
Both B40 and M40 consisted of 5.2 million EPF members who contributed to the fund, while the T20 had 2.3 million members.
He said one of the reasons behind the inadequacy of retirement savings is the low-wage structure which has been the country’s most crucial problem.
The median wage for Malaysians in 2021 was RM2,250. Median wage is not mean (average wage). It means 50 per cent of Malaysia’s 9.7 million wage earners are earning less than RM2,250 per month.
While median savings is the middle value in a set of savings data, with half of the individuals having savings greater than the median value and the other half having savings less than the median.
For instance, in a set of five savings values, such as RM10, RM20, RM30, RM40, and RM50, the median savings is RM30. When a new savings value is added, such as RM60, the median changes to RM35, which is the average of the middle two values in the set (RM30 and RM40).
Other factors include inconsistent contributions from EPF members and low financial literacy.
“Based on our surveys conducted over the years, it is apparent that the level of financial literacy among Malaysians is still significantly low,” he said.
As an illustration, he provided some statistics, stating that the financial literacy rate among EPF members was 29 per cent, while the overall rate for Malaysians was 36 per cent.
This figure is lower than that of neighbouring countries like Singapore, where the population had a financial literacy rate of 78 per cent.
