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LETTER | Insufficiency of retirement funds will hit elders hard in the future
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LETTER | The government needs to be aware of the snowballing insufficiency of retirement savings facing retirees in the future.

The government’s decision to use the EPF contributions as collateral for loans is to be appreciated as it is possibly the only way out of this temporary necessity.

Authorities can select a few volunteering banks for this purpose as the interest rate has to be lower than the EPF dividends and the legal fees for the standard loan agreement should also be reasonable.

The government can ensure that these two basic conditions are agreed upon by the banks to encourage those badly in need of loans to choose this alternative. The government can in turn offer the participating banks some privileges for their assistance.

If this is accepted by those clamouring for an EPF cash withdrawal, it will relieve the government of a major dilemma. Hundreds of thousands of contributors are in dire straits and want part of their EPF savings to tide over the present financial difficulties brought about by the Covid-19 pandemic and the resultant job losses, hike in the cost of living, and inflation. 

It could also have electoral implications as six states will be conducting their elections in a few months’ time.

However, the government has been wise not to allow for more withdrawals as it will dangerously deplete the amount available for the retirement years for the lower-salaried groups. 

This problem has also exposed the serious need for a social security net for retirees, which many countries have implemented out of sheer necessity.

Malaysia has steadfastly refused to consider this impending problem, which will snowball into a major socio-economic and even political problem in a decade or two as the number of retirees hits critical mass.

It is best that the government start planning for a senior citizens’ retirement scheme on a small scale from now on.

It is regrettable that when the question about a pension scheme for senior citizens was highlighted in Parliament by Selayang MP William Leong, the response was totally negative.

The least the government could have stated was that an ad hoc committee will be set up to study this proposal as it is going to be a major problem in the future. It will have to face this eventuality ultimately and the best time to start thinking about this is right now.

Most of the B40s will possibly still be in the same category even when they retire in a decade or two from now. Malaysia’s wages and salary schemes are woefully low and inadequate, especially for the B40 who number in the millions.

Even the M40 will not be better off as inflation and the spiraling cost of living will eat into their retirement savings in the EPF.

Meanwhile, the gulf between the rich and the poor is immensely wide in the country due to the rich getting richer and the poor getting poorer because of lopsided and unbalanced socioeconomic planning for the last few decades, despite the progress of the country.

Urban poverty has replaced the once prevalent rural poverty as a major socio-economic factor,  demanding holistic programmes to overcome it.

Only a government retirement scheme can help in this situation for both the B40 and the M40. The government has to take heed of this slowly snowballing problem and act with foresight.

As it is, governments of the past have procrastinated or ignored this problem as they thought it was not so urgent. The EPF episode has fortunately spotlighted this problem in depth and the government has been forewarned of the impending crisis in a decade or two if this problem is not addressed fully.

The government already has much experience and vital actuarial data about the pension scheme for civil servants, and drafting out one for the private sector workers will not be difficult.

Malaysia can learn from the retirement pension schemes that have been implemented in various countries, especially the Scandinavian nations.


The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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