KUCHING: An economist has put forward a thesis that the proposed mandatory monthly withdrawals from the Employees Provident Fund (EPF) could provide a solution to challenges related to Malaysia’s ageing population and rising old-age poverty.
“The idea is to ensure retirees can cover daily expenses and health care with a regular income,” said Universiti Malaysia Sarawak (UNIMAS) economist Jerome Kueh.
“As Malaysians are living longer, having enough money during retirement is vital.”
Kueh said that monthly withdrawals could lead to part of the fund remaining in the account, acting as a potential investment source for retirees.
This, he said, could provide a sustainable income source that enriches their financial well-being in their golden years.
The economist, however, emphasised that such a policy shift would most likely require a generational change and would not happen immediately.
The Department of Statistics reported that Malaysia’s ageing population rose to 6.8 per cent of the total population in 2020, up from 5 per cent in 2010.
Moreover, the ageing demographic is increasing at a rate faster than anticipated, with projections showing more than 15 per cent of the population will be above 65 years of age by 2050.
The government is currently finalising a plan to mandate monthly EPF withdrawals for retirees when they turn 55, but this would only apply to those born in 2010 and thereafter.
During the International Social Wellbeing Conference 2023 recently, Prime Minister and Finance Minister Anwar Ibrahim voiced no objections to the proposal, but noted it would depend on the EPF’s capabilities.
While the EPF clarified that there are no changes planned to the existing lump sum withdrawal system for those aged 55 and 60, it noted that the option for monthly withdrawals is available for those who voluntarily opt-in.
Checks by New Sarawak Tribune showed that over 7,000 EPF members have already voluntarily chosen this option.
“The choice, however, between taking all money at once and monthly withdrawals should be the retiree’s decision. Everyone’s financial situation is different, and they should have the freedom to decide what works best for them,” Kueh said.
He also suggested that the financial planning industry would have to adapt if the proposal is accepted, as retiree spending and saving patterns would likely change.
This shift could also have an impact on personal financial planning, as retirees may face less flexibility in managing their finances due to the absence of lump-sum withdrawal.
“Monthly withdrawals could help retirees manage their money better by encouraging smart financial planning and reducing the risk of misusing funds or overspending,” Kueh pointed out.
However, he also cautioned that it also places limitations on financial flexibility, particularly for large expenses or potential investments.
