KUALA LUMPUR (March 30): Low Employees Provident Fund (EPF) savings have underscored material longer-term risks to household resilience, according to Bank Negara Malaysia (BNM).
In its Financial Stability Review for the second half of 2021 report published on Wednesday (March 30), the central bank highlighted that further drawdown of retirement savings would increase the financial vulnerabilities of households over the longer term, given already insufficient savings for retirement.
“Risks would be higher for household borrowers with loan tenures extending into retirement and those who are already retired.
“As the economy recovers, it will therefore be important to ensure that impacted households are able to gradually rebuild their financial buffers.
“Efforts by the government to pursue the necessary labour market and social protection reforms will be key towards raising income levels and household resilience in the long run,” it said.
Based on the EPF's statistics, around 6.1 million EPF members currently have retirement savings of less than RM10,000 in their accounts, of which 3.6 million households have less than RM1,000.
The government in mid-March announced a new special EPF withdrawal of RM10,000 to help Malaysians tide with the impact of the Covid-19 pandemic, which the EPF urged should be the last such withdrawal allowed as it reiterated its concern about Malaysians' retirement security.
It was the fourth special withdrawal, after i-Lestari and i-Sinar in 2020 and i-Citra in July 2021, to meet urgent cash flow needs of members during the periods of the movement control order (MCO) and the subsequent economic slowdown. As of end-2021, a total of RM101 billion had been withdrawn under the first three facilities.
Meanwhile, the central bank said that moving forward, an improving economic outlook and employment prospects are expected to support overall household debt-servicing capacity.
It also stressed that public support measures and repayment assistance offered by banks would continue to help financially-distressed households cope with income and employment setbacks.
“In 2021, 23,711 new borrowers enrolled into AKPK’s (the Credit Counselling and Debt Management Agency) Debt Management Programme to rehabilitate their finances.
“Under URUS, borrowers can benefit from free financial advisory and education programmes aimed at promoting longer-term financial resilience,” it said.
Read more stories from the BNM Annual Report 2021 here.