AN economist has cautioned against proposals to allow dividends from the Employees Provident Fund (EPF) to be transferred into Account 3 for withdrawal during festive periods such as Hari Raya, describing the move as financially unsound and detrimental to long-term retirement security.
Academic Dr Barjoyai Bardai told The Vibes that the calls by certain contributors for greater flexibility in accessing EPF dividends reflect a worrying shift in public attitude toward retirement savings.
“We have begun a tradition that is not right. If we look at previous generations, they never asked for EPF withdrawals or dividends to be distributed for spending because they understood that EPF savings are meant for old age,” he said.
Barjoyai’s remarks come ahead of the Employees Provident Fund’s anticipated dividend announcement, with the fund widely expected to maintain its conventional savings dividend rate at 6.3 per cent for 2025.
In an optimistic scenario, it could even reach 6.5%.
For 2024, both the conventional and syariah funds reported dividends of 6.3%.
The 6.3% reported last year was the fund’s strongest performance since 2017, when the retirement fund announced 6.9% for conventional savings.
Meanwhile, Barjoyai noted that during the COVID-19 pandemic, the government permitted up to four special withdrawal schemes to ease financial hardship.
However, he said the long-term impact on contributors’ savings has been severe.
“Today, about 20 per cent of contributors have only RM1,000 left in their EPF accounts, while 50 per cent have less than RM10,000 in savings,” he said.
“This is far from EPF’s target of ensuring contributors accumulate at least RM390,000 by the time they retire.”
According to him, even achieving RM390,000 in retirement savings would allow for an estimated monthly withdrawal of only about RM1,900 — an amount he described as insufficient for sustainable living in retirement.
“If EPF allows dividends to be channelled into Account 3 for withdrawal purposes, the RM390,000 target will become even more difficult to achieve. Based on projections, only about four per cent of contributors would reach the target,” he added.
No more withdrawals
Barjoyai stressed that EPF funds should remain strictly reserved for retirement and not be treated as a short-term financial buffer.
He argued that calls for additional withdrawals provide “false hope” and warned that the consequences would only be felt 20 to 30 years from now, when contributors face inadequate retirement income.
“Instead of asking for EPF withdrawals, the public should urge the government to expand assistance and subsidies,” he said.
“Retirement savings must not be compromised. The responsibility to support workers should also be shared by both the government and employers.”
He concluded that the proposal to credit dividends into Account 3 for withdrawal is “not a wise idea” and risks undermining the fundamental purpose of the retirement savings scheme. – February 24, 2025