EPF's i-Sinar a stop-gap measure for unprecedented times - Analyst

KUALA LUMPUR: The government needs to make it clear that i-Sinar and other other Employees Provident Fund (EPF) programmes are stop-gap measures in light of the current challenging economic situation.

Institute for Democracy and Economic Affairs (IDEAS) research manager Lau Zheng Zhou said the think tank understands the people’s urgent need to meet financial obligations in these challenging times, but Malaysia should not encourage individuals to think of EPF savings as their first option for funds.

He said the think tank is concerned over the financial security of EPF members as well as those of their families.

“About 70 per cent of EPF members aged 55-60 years opt for lump-sum withdrawals upon retirement, and half of the members exhaust their savings within just five years,” he told Bernama.

Lau said although the EPF i-Sinar facility is expected to be fully taken up, thus boosting consumption, the multiplier effect could be limited as this is more like replenishing spending that would have happened in normal times, rather than a massive injection to the economy.

“Also, a portion of these withdrawals could be used to repay debts rather than for consumption per se,” he added.

Having said that, Lau believes replenishing Account 1 would be a good measure once the individuals have recovered their earning ability and resume their EPF contribution.

As such, he said individuals should be given the right incentives to manage personal finances in a responsible manner, and to keep a healthy balance between current and future spending needs.

Meanwhile, University Malaya’s Faculty of Economics and Administration senior lecturer Dr Mohammad Tawfik Yaakub opines that the announcement on the expansion of the scope of the i-Sinar facilities is not quite appropriate because the government has just agreed to implement targeted withdrawals earlier.

"As such, I’d advise EPF contributors to plan small investments in the form of other savings so that the cash is not used up just like that, instead of using all of the withdrawal to meet emergency needs," he said.

In the retirement context, Mohammad Tawfik said he is confident that it will not be a big problem if contributors are able to plan for their retirement needs and not create new debts that can disrupt their cash flow and expenses in the future.

Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid hopes that EPF members who are not affected would refrain from making any withdrawals.

"This is to ensure that they have sufficient savings upon their retirement," he said, adding that the pandemic had forced the government to take unconventional measures as many are still adversely affected.

“In general, the withdrawal will add liquidity to the country’s economy, and this should give a boost to economic activities as Malaysians have a high tendency to spend,” he said.

Yesterday, the EPF said it expects the i-Sinar facility to benefit two million eligible members, with an estimated advance amount of RM14 billion to be made available.

Chief executive officer Tunku Alizakri Raja Muhammad Alias said the EPF has widened the scope of i-Sinar to cover active members who have lost their jobs, or given no-pay leave, or have no other source of income.

Eligible members will have access to 10 per cent of their savings in Account 1 but will have to ensure that they have a minimum balance of RM100 in their account, and the maximum amount allowed to be advanced is RM60,000.

-- BERNAMA