Malaysia government allows another round of pension fund withdrawal capped at RM10,000 to weather COVID-19

KUALA LUMPUR: The Malaysian government has allowed a fourth round of withdrawals from the country’s Employees Provident Fund (EPF) retirement scheme.

Prime Minister Ismail Sabri Yaakob announced in a special press conference on Wednesday (Mar 16) that this withdrawal would be capped at RM10,000 (US$2,382) per contributor. 

However, he urged contributors to consider carefully before making the “special withdrawal”, in the interests of their future.

There have previously been three withdrawal schemes for EPF contributors since the pandemic struck. Under the i-Lestari, i-Sinar and i-Citra schemes, RM101 billion has been withdrawn from the retirement fund by 7.34 million contributors since 2020, the prime minister noted. 

“Based on findings from thorough studies and observations during the recovery phase after this pandemic, there are those within the Malaysian Family still affected from an economic standpoint. (They suffered) loss of income and are currently rebuilding their lives,” Mr Ismail Sabri said. 

“Although the government has given permission for this special EPF withdrawal, nevertheless I plead with contributors to keep your savings unless the situation is truly pressing.”

In a press statement, Finance Minister Tengku Zafrul Tengku Abdul Aziz said EPF would give further details on the special withdrawal in the near future, as well as necessary steps to manage the issue of diminished retirement funds faced by contributors.

There have been calls to allow for a fourth round of withdrawals by various quarters, prior to Wednesday’s announcement.

The United Malays National Organisation (UMNO), Mr Ismail Sabri’s party, has been urging the government to allow for a new round of EPF withdrawals since December last year.

During the recent Johor state election, the opposition had also called for the government to allow for another round of special withdrawals from the retirement scheme. 

However, the finance minister warned in January this year that more EPF contributors would end up retiring below the poverty line if the government allowed for more withdrawals. He added that there will be future implications especially if a recession occurred. 

Almost half of EPF’s contributors had less than RM10,000 in their accounts, he stated at that time.

On Mar 14, the minister said in parliament that without the three previous withdrawal schemes, the EPF’s dividend for conventional savings in 2021 could have reached 6.7 per cent. Currently, it has dropped to 6.1 per cent. 

He added that another round of withdrawals capped at RM10,000 could see an estimated RM63 billion taken out by the 6.3 million eligible contributors.

This, he said, would force the EPF to rebalance its portfolio by selling off more overseas investments and halting domestic investments in the short to medium term to accommodate the withdrawals, resulting in serious implications in the long-run.