THE new Akaun Emas, which will be introduced in January by the Employees Provident Fund (EPF), has received a mixed response from financial industry players.

Bryan Zeng, general manager of FA Advisory Sdn Bhd, welcomes the initiative as it will force retirees to save during their retirement. “Retirees who are sophisticated investors can withdraw their savings in

Akaun 55 to invest in individual securities or unit trust funds that are expected to generate higher returns,” he says.

Kevin Neoh, a licensed financial planner at VKA Wealth Planners Sdn Bhd, says the initiative will benefit EPF members as they will have more savings for retirement. “It is well known that EPF members tend to exhaust their savings within five years of retirement. This is because financial literacy is still very low among Malaysians.

“Our contribution to the EPF is an important retirement asset. But we tend to withdraw the money for other purposes such as housing, illnesses and sometimes for the children’s education.”

According to an EPF report published last year, titled “Savings and Your Retirement”, 50% of its members exhaust their entire savings within five years of retirement.

While some say the EPF should give its members the option of not contributing to the fund after they reach 55, Neoh does not think this will work. “It will not work as most members will end up with the status quo, given the choice,” he says.

Zeng says EPF members are encouraged to continue contributing until they are 60 and make a full withdrawal from Akaun Emas, unless they are sophisticated investors who know how to plan their retirement. “The main reason is that the compound interest will contribute greatly to the retirees’ savings,” he adds.

The Akaun Emas will come into force on Jan 1. EPF members who continue working past the age of 55 will see their monthly contributions (11% by employees and 12% to 13% by employers) placed in this account. Also, any funds not withdrawn from Akaun 55 by the age of 60 are automatically transferred to Akaun Emas.

According the EPF’s press release, CEO Shahril Ridza Ridzuan says the initiative was introduced to enhance the existing retirement scheme as the average Malaysian today works beyond the age of 55 and the minimum retirement age in the country is currently 60.

“Thus, the EPF decided to provide a second retirement nest egg via Akaun Emas to secure members’ savings from age 55 to 60. The extra savings accumulated during this five-year period will go a long way in serving members’ needs when they retire,” he says.

While the initiative will help individuals save more, Robert Foo, managing director of MyFP Services Sdn Bhd, says it will not solve the real issue, which is to prepare members for retirement. “It will not help them substantially. The additional five years of savings under Akaun Emas will only make their funds last a little longer.”

Foo says the entire issue boils down to the real income of the people, which is currently under pressure due to the slow wage growth and high inflation rate (especially when it comes to education and healthcare). These have left them without much money to save for retirement.

While the rising GDP per capita of the country indicates that Malaysia is on track to become a high-income nation by 2020, Foo says the measurement does not reflect the reality faced by most. “That is because the disparity between the rich and poor has widened. The GDP per capita, which indicates the average income of the people, does not reflect the real income of the people in the middle and lower income groups.”

He says it requires the concerted efforts of the government to increase the income of the people. The wealth management industry also plays a role in educating the public and raising their awareness of retirement planning.

For now, the best way for people to save enough for their retirement is to delay their retirement age and work a few years longer, says Zeng. “In addition to the compound interest rate, you would be generating income for another five years and would not have to use the savings in your retirement fund.”

The EPF has also announced that it will extend its dividend payments up to the age of 100, from 75 previously. Foo says the move will only benefit those who do not need to withdraw their savings.

“This is because the people who keep their money with the EPF until age 75 are mainly those who can live out their retirement without withdrawing the money from their account. They are opting to have higher returns from EPF instead of keeping the money in fixed deposits. It will benefit the rich, but not those who are trying to build their retirement funds,” he adds.

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