This article first appeared in The Edge Malaysia Weekly on July 5, 2021 - July 11, 2021

WHATEVER one’s stand on the Covid-19-related special withdrawals from the Employees Provident Fund (EPF), the i-Lestari Account 2 and i-Sinar Account 1 facilities have in the past 15 months released more than RM70 billion to members to be spent in the local economy.

At least another RM7 billion has been approved for release this year via i-Sinar and up to RM30 billion could be added to that sum via the i-Citra facility introduced on June 28 in the government’s latest stimulus package, Pemulih. An RM80 billion boost is roughly 5% of the country’s gross domestic product — a sizeable but expensive boost, most of which is taking place this year under i-Sinar.

Subject to the savings remaining in their retirement kitty, some 12.4 million EPF members below age 55 can (starting July 15) apply to withdraw up to RM5,000 — a maximum of RM1,000 per month for each of the remaining five months of this year — from their combined Account 2 and 1 savings via i-Citra, starting with the balance in Account 2.

Unlike with the earlier fund releases, few are betting the economy will see a RM30 billion consumption boost from this third round of special withdrawals, given that many of the lower-income earners who need the cash most may have already exhausted most of their retirement savings with EPF.

As EPF CEO Datuk Seri Amir Hamzah Azizan told The Edge in a recent interview (Cover Story, ­Issue 1374, June 14), “It’s worrying [because] they’ve used their emergency funds” and would have to “make hard decisions to save more” for their golden years when conditions improve.

According to him, about 6.3 million EPF members have less than RM10,000 in their Account 1 (70% of statutory savings) — which was previously off-limits until they hit age 55 — and 9.3 million members had less than RM10,000 left in their Account 2 (30% of statutory savings), from which withdrawals based on approved needs had been allowed before Covid-19 hit.

According to EPF chief strategy officer Nurhisham Hussein, 4.56 million members have less than RM5,000 left with the provident fund while 2.19 million members (who may include young people who have just joined the workforce and still have time to save for retirement) have less than RM1,000 saved with the EPF. Only 9% of ­i-Sinar applicants were those aged 50 to 54, he toldThe Edge when asked to confirm numbers shared on Social audio app Clubhouse last week.

The estimate of RM30 billion for i-Citra, however, implies that about six million or half of the eligible members can withdraw the maximum of RM5,000 each, assuming there is enough balance in their savings. The number of members is about the same as the 5.27 million applicants under i-Lestari and 6.49 million under i-Sinar.

We know that 5.27 million withdrew RM20.8 billion from their Account 2 via i-Lestari, which ran between April 1, 2020 and March 31, 2021. Members were allowed withdrawals of between RM50 and RM500 a month during that period. That i-Lestari withdrawals averaged just under RM4,000 per person — below the maximum of RM6,000 allowed over the one-year period — point to there being a number of members with less than RM6,000 in their Account 2.

According to EPF’s statement when announcing its first quarter 2021 performance on June 8, some RM57.93 billion had been approved under i-Sinar and RM50.93 billion had been paid out to 6.49 million people from their Account 1 since March 2 this year, with the remaining RM7 billion to be paid by year-end. While the EPF is still tabulating the final tally of withdrawals under i-Sinar, for which applications ended on June 30, Amir said applications had tapered off as the deadline drew near. The government had previously pencilled in i-Sinar at RM90 billion, according to data in Laksana reports.

Under i-Sinar, members could make withdrawals of up to RM60,000 over six months (for those with more than RM100,000 in Account 1) and up to RM10,000 over six months (for those with less than RM100,000 in Account 1) without other criteria since February 2021.

Tellingly, the EPF is skirting specifics on just how much these special withdrawals had reduced the amount of monthly net inflows (contribution minus withdrawals). Public data showed this to be about RM2 billion a month before the pandemic. Amir told The Edge that the usual inflows (gross contributions) into the EPF were still below what it sees in a “normal” year but non-Covid-related withdrawals “have also tapered off a bit [versus normal years]”. “I think when we get to 2022, we will come back to the normal patterns again of what we’ve seen in the past,” he said.

Last year, net contributions (inflows into the EPF) were about RM20.1 billion — being the difference between RM58.3 billion in withdrawals and RM78.4 billion in (gross) contributions — about 35% below the RM31.1 billion net contribution in FY2019. Last year’s net contributions were also below the RM23.8 billion in FY2018 but still above the RM15 billion to RM16 billion seen in FY2015 to FY2017, according to past data. Bank Negara Malaysia has not released this data on its website since the middle of last year.

And that’s among private sector wage earners in the formal sector, who are not as hard hit as many in the informal sector who are not EPF contributors and can only rely on their own savings or cash transfers from the government, which is currently called Bantuan Prihatin Rakyat (BPR).

About 73% of the RM150 billion Pemulih stimulus announced on June 28 is from enhanced loan moratoriums from the banks (RM80 billion) and members’ own savings from i-Citra (RM30 billion). Most of the RM10 billion direct fiscal injection goes to three types of cash transfers — BPR, special Covid-19 aid (BKC) and special RM500 assistance for those who were furloughed (Bantuan Kehilangan Pendapatan) in October based on EPF and Socso data. (See “Pemulih+ may be necessary to soothe lockdown pain” on Page 13.)

According to data from the Ministry of Finance, BPR cash transfers benefit 8.4 million recipients — 2.8 million households (monthly income RM2,500 and below), 0.8 million households (monthly income RM2,501 to RM5,000), one million senior citizens (monthly income below RM5,000) and 3.8 million individuals who are single and earning below RM2,500 a month. The BKC aid, meanwhile, benefits another 11.4 million recipients (8.4 million households and individuals in the B40 category, and three million households and individuals under the M40 category).

While the reach seems wide at over 11 million beneficiaries — a fact that researchers including those at the World Bank have acknowledged — the adequacy and medium-term predictability of the aid still needs to be improved upon. Among other things, researchers have said aid needs to move from thresholds based on household income to individual income, with dynamic consideration on needs and dependants.

It is a mistake to equate a single-person household with a RM7,000 income, with an eight-person household with that same household income. Data appended in the “Families on the edge” report (Part 2) by the United Nations Children’s Fund (UNICEF) and United Nations Population Fund (UNFPA) conducted in partnership with DM Analytics showed that 2% of households in Projek Perumahan Rakyat (PPR) low-cost flats in Kuala Lumpur earn above RM7,000 a month (median household size: eight persons with five income earners) and 7% earn at least RM5,000 a month (median household size: eight persons with five income earners).

If one does not consider household size and dependents, the people in the 2% and 7% would have been M40 (RM4,850 to RM10,959 with RM7,093 median) households instead of B40, as per the income definition according to the 2019 Household Income Survey. The Department of Statistics’ Salary and Wages report for 2019 lists median individual income at RM2,442 and average individual income at RM3,224 but did not provide a breakdown by decile.

It is understood that the government cross-checks BPR applications with EPF, JPJ and Inland Revenue Board data, which may not capture many in the informal sector.

The need to have a dynamic database is even greater in the current Covid-19 situation, given that historical income thresholds are rendered meaningless when even sought-after celebrity chefs cannot have dine-in guests and pilots are grounded.

While individuals can appeal for the cash aid, help would arrive faster and more efficiently if people’s data is already captured in a central updated database, an effort that the Economic Planning Unit has said is underway, to cut overlaps and expand the reach of the country’s social safety net.

The ongoing digitisation of government processes needs to address this issue, as the need for a wider social safety net grows as more people draw down on their savings.

Incidentally, the Pemulih package — which was announced just as MCO 3.0 was extended beyond end-June because the thresholds to move to Phase 2 of the Covid-19 Exit Plan had not been met — coincided with the #BenderaPutih or white flag solidarity movement on social media to encourage people to signal for help if they are facing hardships currently.

It was also the same week that health director-general Tan Sri Dr Noor Hisham Abdullah asked the public to be vigilant and look out for signs of depression. He said the number of suicide cases reported to the police had risen to 336 in the first three months of this year, almost half of the 631 cases reported in the whole of 2020 and 609 cases in 2019. Former prime minister Tun Dr Mahathir Mohamad also noted the rising number of suicide cases amid the pandemic, on social media last week.

Financial security is one factor that could cause severe mental stress, especially amid lockdowns during the pandemic, studies have shown.

As Malaysians age, the adequacy of retirement savings become even more important. Even before Covid-19 hit, only about one-fifth of EPF members had what it calls the basic recommended savings of RM240,000 — which is based on one having only the minimum civil service pension of RM1,000 per month to spend for 20 years (assuming one retires at age 55 and the average Malaysian lifespan of 76 years).

Amir said while it was still too early for him to comment on EPF’s 2021 dividend, its strong first quarter number shows the provident fund has the capacity to safeguard retirement savings for its members despite the outsized withdrawals this year. (See “Making EPF relevant to more Malaysians before retirement”, Issue 1374, June 14). Ensuring that no one who needs help slips under the radar, however, would need a multi-stakeholder policy approach as well as a commitment by the people to save and stay healthy for their old age.

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