Money Minute - The Truth about EPF

Andrew Chia, CENFIS correspondent
9.20am GMT, 3 April 2023

Malaysians are having lots of problems with saving money via their EPF (Employees Provident Fund) account.  With the Covid pandemic which came with long periods of lockdowns, EPF members have mostly used up their savings and would need to draw on their retirement fund.  This is especially true for the poor and middle-class where inflation creates a situation where their income is not enough to make ends meet.  In fact, many of them need to borrow on a monthly basis; usually from credit cards and personal loans.  Some even resort to high-interest sources called the Ah Longs because their family and friends are also in dire straits like them.

The government is worried that if they keep drawing on their retirement account it would be depleted, leaving nothing for old age.  The expert and authorities are expressing their concerns in today's report here,

https://www.thesundaily.my/local/pre-elderly-who-made-epf-withdrawals-during-covid-pandemic-need-help-to-avert-financial-crisis-economists-HI10900700

However, there is one crucial issue which a lot of people have overlook.  It is found in an old article about EPF members.  Here,

https://www.freemalaysiatoday.com/category/nation/2021/10/31/only-3-of-malaysians-can-afford-to-retire-says-epf/

This article says that "a majority of those who withdrew their entire EPF savings upon reaching age 55 would use it up within two to three years."

Not many people realize that this is a more serious problem involving more EPF members.  They are all focused on the current issue of members having critical cash flow problems.

The truth is that even if EPF members do not withdraw their savings today, they would still use it up within a very short time.  This means that most of the members would still not have money for retirement in any case.

What the members need is basic money skills.  We call it financial intelligence at CENFIS.

Yes, they have saved a lot of money over a long period of time.  But by and large, people don't know what to do with their savings.  And they don't have the financial discipline to manage the use of that savings over a longer period of their retirement, say, ten or twenty years.  They use up their savings in just a few short years.

Some get cheated of their hard-earned savings through scams.  But more people lose their money through bad investments, having little or no knowledge about our money and business world.

The authorities should start teaching EPF members about money or investing skills.  This may help members receive passive income, say, from property investment.  They will then be in a much better position to spend their retirement life with their loved ones, with little or no financial worries.

Learning message:  Saving money is just one element of financial intelligence.  We need to learn how to invest our money, too.