The Employees Provident Fund (EPF) has started accepting applications for the EPF i-Sinar facility involving a total of 8 million eligible members of two categories, in an effort to provide relief to those badly affected by the Covid-19 pandemic.
But before you do that, there are three important questions you need to answer: (1) Can your EPF savings last through your retirement? (2) Do you only rely on EPF savings to finance your retirement? (3) What is your purpose in EPF withdrawal before your retirement?
Know your current situation
According to the Chief Economist of Bank Islam Malaysia Bhd, Dr Mohd Afzanizam Abdul Rashid, the withdrawal of the EPF i-Sinar can be considered for urgent purposes while giving some thought of safeguarding your retirement savings as well.
"It comes in handy for those who lost their jobs or suffer from salary cuts and are now really short of money to sustain their everyday life. However, bear in mind that the EPF savings, especially Account 1, is basically meant for retirement or when one reaches the age of 50 where part of the Account 1 money can be withdrawn." he says, while urging those who intend to do so to look for better alternatives first before eating into their retirement savings.
Afzanizam also reminds employees of the private sector in particular to be mindful of their obligation to ensure a sustainable financial standing upon retirement.
"Daily expenses, medical and so on are an important consideration when one retires. Unlike civil servants, EPF members who are generally of the private sector do not have pensions like the former. If the EPF money is withdrawn before time, it is feared that they will face financial problems when they retire later,” he points out.
Balancing current needs and retirement safety net
The data-driven interpretation that follows may help you decide on the suitability and practicality of the EPF i-Sinar withdrawal.
BERNAMA reported that more than 50% (137,000 out of 245,000) of the 54-year-old EPF contributors held less than RM50,000 in their EPF savings to cover their retirement. More alarmingly, about a total of 43% (5.38 million members) under the age of 55 showed savings of less than RM10,000 in their Account 1.
Based on the average life expectancy of Malaysians at 75, if you choose to retire or withdraw the EPF savings by either at the age of 55 or 65, theoretically speaking, you will have to go through a retirement period of at least 20 years or 10 years, and with savings of less than RM50, 000, it is very challenging or inadequate, as 70% of EPF members aged 55 - 60 choose to make a lump sum withdrawal where some of them spend it all in as short as 3 - 5 years.
The EPF targets a minimum savings of RM240,000 (Basic Savings) among its members when they reach the age of 55. ‘Basic Savings’ refers to the minimum amount of savings that covers the basic needs of retirement for 20 years, from the age of 55 to 75, in line with the average life expectancy of Malaysians.
Did you lose your job or being troubled by pay cut?
Dawson Yeang, a member of the public, believes that people who lost their jobs or with income badly impacted by the viral pandemic may utilise the EPF i-Sinar facility should an impending need arise.
"It can help those who find it difficult to continue their everyday life as usual, especially those who face difficulties in buying food, daily necessities and paying fees or rentals," he says.
At the same time, Yeang also emphasizes that the EPF's genuine purpose is to safeguard the old-age retirement savings.
"If we are not in urgent need of of money, we should not touch it (withdrawal of EPF’s Account 1 savings) as long as our physical ability and age factor still allow us to earn an alternative living because after reaching retirement age, it is very difficult to get a job, after all," he cautions.
Echoing Yeang's view, Muhamad Ameer Asyraff bin A.Raman agrees that EPF i-Sinar can provide an urgent relief to cover the essential daily expenses when one finds it so difficult to continue the normal routines in life, having lost his or her livelihood, especially the unemployed.
“If possible, i-Sinar should be the last resort because most Malaysians do not have enough old age savings as repeatedly reported. However, i-Sinar can come to someone’s immediate rescue especially those who are deeply affected by the prolonged Covid-19 pandemic,” he says.
Are you saving enough for your old age?
The EPF savings are a result of your hard work and you may use it as best you can at your discretion. Having said that, the EPF is basically a retirement fund for your old age. The enforcement of EPF is a good way to discipline us to save consistently for our retirement or old age.
It is very saddening to see senior citizens who cannot afford retirement simply because they have to continue to work to support their daily living when their EPF savings have been exhausted. In fact, and obviously, it is difficult for those aged 60 and above to get a job because the age factor is no longer on their side.
Although the EPF i-Sinar withdrawal is authorized by the government, one must not take it for granted. Eligible members should only utilise it for urgent basic needs when there is no other choice. Again, your consideration should take into account the financial wellbeing of your old age. Plan carefully so that you don’t get caught up in a tight financial situation when you retire.
EPF dividend
One thing worth mentioning is that your EPF contribution is entitled to return on investment through dividend payment at a minimum rate of 2.50% per annum for Conventional Savings as mandated under the EPF Act 1991, as guaranteed by the government. Reducing the overall savings means lower dividend in the end.
There are always two sides of the same coin. If your current urgent needs precede everything else, you may consider i-Sinar; on the other hand, if you can still work out an alternative, it’s always worth exploring.
Reference Source: EPF
