KUALA LUMPUR (March 21): Bank loans using Employees Provident Fund (EPF) Account 2 savings as support are to bear annual interest rates of 4% to 5%, according to the Ministry of Finance (MOF).
In a statement on Tuesday (March 21), the MOF reasoned that the initiative will therefore not burden the rakyat as the rate is much lower than the current personal financing market rate of around 8% to 15%.
The ministry added that the government is currently finalising the initiative, and more details will be announced by the EPF at a later date.
The ministry clarified that the Account 2 savings will be used as support for these loans; Prime Minister and Minister of Finance Datuk Seri Anwar Ibrahim had earlier said that the funds could be used as collateral.
Reiterating Anwar's earlier reply during Minister Question Time at Parliament, the MOF said the initiative does not conflict with Section 51 of the EPF Act 1991 as savings in Account 2 are only used as support for the loan through withdrawals at the age of retirement.
“This is in line with the EPF’s investment objective as a long-term retirement fund to protect and increase the value of members’ savings through the declaration of a stable and sustainable dividend rate,” it said.
On March 9, Anwar — while adamantly against further EPF withdrawals — announced that Putrajaya was giving the green light to EPF contributors to use savings in their Account 2 as support for personal loans from banks to wade through difficult times.
The EPF has since been tasked with assessing the measure’s implementation, with the pension fund saying it will carefully consider all relevant factors to ensure its smooth implementation.
In the past two years, four tranches of EPF withdrawals were allowed — the special withdrawal facility (Pengeluaran Khas) of up to RM10,000 last year, i-Citra in 2021, as well as i-Lestari and i-Sinar schemes in 2020 — which resulted in a whopping RM145 billion withdrawn in total.
According to Deputy Finance Minister Datuk Seri Ahmad Maslan, median EPF savings across all races fell to RM8,100 in 2022, versus RM16,600 prior to the pandemic in 2019.
The pension fund also saw its assets under management drop for the first time in history in 2022, down 0.7% to RM1 trillion from RM1.01 trillion in 2021.