Kuala Lumpur, Malaysia – Roob Ganesan, owner of a small factory near Kuala Lumpur, felt compelled to dab his retirement savings during the COVID-19 pandemic.
When the Malaysian government announced a lockdown to control COVID in early 2020, Roob’s factory that produces lures started bleeding money.
Roob was determined not to lay off his 22 employees, but he began to lose hope that things would improve as the lockdown continued into 2021.
“My business suffered a loss due to the previous government’s decision and I thought things would turn around,” said the owner of Drave Fishing Sdn Bhd in Klang, a city about 30 kilometers (18 miles) west of Kuala Lumpur. , Roob told Al. Jazeera.
With his business in jeopardy, Roob pooled RM15,000 ($3,400) from his Employee Provident Fund (EPF) account, which he had saved about RM200,000 ($45,157) over the years for retirement. decided to pull out.
Savings drawn in two installments in 2020 and 2021 allowed Roob to cover the growing costs of running the business, including paying employees.
“We were getting to a point where cash flow was very low, so the EPF withdrawal came as a blessing in disguise,” Roob said.
“It was the right thing to do, so I have no regrets at all.”
Lube cases are by no means unique.
About RM145 billion ($33 billion) was withdrawn from EPF accounts by Malaysians during the pandemic.
In 2020, the government of then-Prime Minister Muhyiddin Yassin made retirement savings more accessible to Malaysians facing economic constraints.
Malaysians have long been allowed to partially withdraw from compulsory retirement plans for certain reasons, such as covering education, health and housing costs, but the change was triggered by the country’s lockdown. We were offered the option to withdraw funds to alleviate the difficulty.
The first of four special withdrawal schemes introduced in April 2020 allowed donors to withdraw RM500 ($113) per month for 12 months. The latest round, announced last March, capped withdrawals at 10,000 ringgit ($2,253).
“At the time, I really needed the money,” Selvendra Rao, a physiotherapist who runs the Wellborn Physio Center in Petaling Jaya with his wife Prithirasmi, told Al Jazeera.
“I had no savings at that point, so I had to use EPF funds. How to save their business.
While the withdrawal provided a lifeline for many Malaysians, looming pensions in the Southeast Asian country left millions of workers unprepared for retirement due to low wages, high levels of debt and rising life expectancy. It made the crisis worse.
Last month, Malaysia’s central bank warned that the average Malaysian was at risk of running out of retirement savings 19 years before he died.
According to EPF data, as of December, 51% of the 6.7 million EPF contributors under the age of 55 had savings of less than RM10,000.
Prime Minister Anwar Ibrahim warned that 81% of EPF contributors do not have enough savings to live above the poverty line after retirement, responding to a question in parliament earlier this month.
The EPF, which operates under the Ministry of Finance, said in a written response to Al Jazeera that the increase in withdrawals would have a long-term impact on donor retirements.
“Based on Malaysian life expectancy, RM10,000 would allow members to earn a retirement income of less than RM42 ($9.50) per month for 20 years,” the spokesperson said.
But a spokesperson said the RM145 billion withdrawn during the pandemic was only a small fraction of the fund’s total assets.
“Nevertheless, that amount is still under control as it is only 15% of total assets under management, which is currently RM1 trillion.” [$225bn]’ said the spokesperson.
Economist and former MP Nunsari A Radhi said allowing the withdrawal of EPF savings would be a mistake and would put pensioners at risk of retirement.
“After about RM145 billion has been withdrawn from pension funds, if the number of people without pension funds is not large, but only with EPFs, retirees living in poverty are on the horizon.” he said. Al Jazeera.
Despite the lack of savings, some Malaysian politicians, including opposition leader Hamza Zainuddin, have called on the government to allow targeted withdrawals for those in need.
Hamzah cites the case of a contributor who was unable to pay off his mortgage despite having large amounts in his retirement account.
Anwar, who is also finance minister, has said there are no plans to continue the pandemic-era withdrawal scheme, a stance supported by the EPF. However, the Anwar government has surfaced plans to allow EPF savings to be used as collateral for emergency loans.
An EPF spokesperson said the agency was aware of the government’s proposal and would “carefully consider all relevant factors to ensure smooth implementation.”
Economist Nunsari said he was skeptical about allowing retirement savings to be used as collateral for loans, warning that it could only exacerbate the woes of pension funds.
“Whatever it is, we are going to face a big crisis ahead of the elderly living in poverty,” he said.
For Selvendran and his wife, the option to use EPF savings as collateral for loans is a welcome development. Having been in business for nine years, the couple found it sometimes difficult to secure a loan from the bank.
“I would definitely bring it up, but again, it’s purely for business,” he said.
