Issues: A better safety net needed for housewives

This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on June 11, 2018 - June 17, 2018.
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The proposal to recognise housewives as contributors to the country is a step in the right direction. However, a better safety net — as opposed to just providing a pension scheme for housewives — is needed to protect their interests, say financial planners.

Robert Foo, founder and managing director of MyFP Services Sdn Bhd, says the government’s proposal to channel 2% of the husband’s salary to the wife’s Employees Provident Fund (EPF) account was conceived based on the notion that housewives are at the mercy of their husbands financially and left in the lurch when faced with adversity. The proposal was part of Pakatan Harapan’s general election manifesto.

While the gesture seems to be good one, Foo says it is based on a mere assumption, without any statistical evidence. “We see it every day with our clients. It is true that divorce rates are going up and homemakers, who are mainly women, have a difficult time when this happens. This is worse among the Muslim community as women face a lot of challenges in getting a fair share and proper alimony to support their children.

“If the government wants to address the issue of abandonment and abuse, it is good, but do it well using proper research. Otherwise, it is just a lot of unnecessary administrative work that could lead to more leakages.”

Foo points out that the proposal also assumes that husbands are abandoning their wives in retirement — another unsubstantiated claim. He stresses that the 2% from the husband’s EPF contribution and another RM50 from the government on a monthly basis does not amount to much considering the hardship one faces in challenging times.

“It is rather premature and poorly thought out. It is like an ice cube’s chance in hell,” he says.

Shing Yee Ling, a financial planner with VKA Wealth Planners Sdn Bhd, concurs with Foo. She adds that many kinks need to be ironed out before the scheme is implemented.

There are many unanswered questions with regards to the scheme, says Shing. “For instance, is it fair for the deduction to continue if the couple are not on good terms? How about in the case of Muslim men, who may have more than one wife?”

But despite all this, she stresses that having “something is better than nothing”.

In a household where the husband earns RM4,000 a month, the wife will have monthly savings of RM130. In five years, she will have accumulated about RM7,800 (not including dividends given by the EPF and the rate of inflation).

“If this scheme runs for 20 years, the wife is bound to have at least RM54,000 in her EPF account. I think is a start to helping housewives,” says Shing.

“Personally, I would prefer the contribution to be half of the 11%. A family is shared by both husband and wife. With wives staying home with no income and savings, it is only fair that the husband shares half of his EPF savings.

“Using the monthly earnings of RM4,000 as an example, 50% of the 11% will see that the wife gets at least RM270 monthly in her EPF account. After 20 years, this will translate into nearly RM100,000, which is a more meaningful form of security.”

Under the previous administration, those who are self-employed or without regular income — which includes homemakers — were encouraged to participate in the voluntary 1Malaysia Retirement Savings Scheme. Under the SP1M, contributors to the EPF are eligible to receive a government contribution of 15% on the amount contributed, subject to a maximum of RM250 a year (which had been extended to 2022), and will receive an annual dividend payment credited to their account until the age of 100.

Phillip Wealth Planners Sdn Bhd wealth planning director Raymond Tay says the newly elected government’s proposal bodes well for housewives as it encourages mandatory savings, compared with the voluntary SP1M. “Effectively, this compulsory measure will ensure housewives receive a regular stream of contributions into their accounts,” he adds.

However, Tay advises homemakers to explore other means to supplement and increase their retirement funds as the government’s contribution is limited while rising healthcare costs and inflationary pressures have diminished the value of the ringgit.

“Let’s not forget the social, physical and emotional sacrifices that housewives have to endure in return for family harmony and well-being, in which case the 2% EPF contribution may be insignificant. It is a baby step towards creating an additional safety net for housewives. But housewives should not be content with this measure alone,” he says.

The government should also emphasise single mothers and single women who are caring for dependants such as elderly parents or those with disabilities, says Tay. He recommends that government review the existing Housewives Enhancement and Reactive Talent Scheme (HEARTS) and 1Malaysia Support for Housewives Programme (1MS4HW) to encourage homemakers to participate in government-funded professional reskilling programmes.

Citing the Labour Force Survey Report Malaysia 2017, Tay says the participation rate of female workers rose by 0.4% to 54.7% last year. “As women are increasingly participating in the labour market, housewives can play an effective role in the economy if they are provided with the necessary support, guidance and encouragement to re-join the workforce so they can build their own nest egg.

“Through the reskilling and upskilling exercises, they could earn an income from home-based businesses and contribute to the country’s workforce. They will be able to work in a flexible and adaptive environment that will have minimal impact on their family commitments.”

Seeing that more men are taking over the role of homemaker, policymakers should omit the gender bias when introducing the scheme, he adds. “The notion that domestic work is women’s work is deemed archaic and should no longer exist in our society today. It has to be a common understanding that domestic work is shared responsibility between life partners, regardless of religion, race and gender.”