RM10,000 EPF withdrawals, for emergencies or Hari Raya?

Liana Zakaria had never applied to withdraw money from her Employees Provident Fund (EPF) account – until now.

The 29-year-old was one of many throughout the country who took advantage of the government’s approval for the fourth round of EPF withdrawals since the start of the Covid-19 pandemic.

While she intends to keep the money for use in case of emergencies, she says she might give some of it to her parents as duit Raya.

But she only plans to do this if she does not receive a bonus at work this year.

“I already have a budget for Raya expenses and will only use my EPF money if an emergency crops up,” she said.

“I never applied to withdraw from my EPF before as I was not affected by the pandemic.”

While Liana has a definite plan mapped out for her hard-earned money, not everyone might share her ability to resist spending the cash meant for their old age.

Analysts have voiced concern that Putrajaya’s latest decision to allow another round of withdrawals ahead of Ramadan will lead to the transfer of money not for emergencies but rather to celebrate Hari Raya Aidilfitri next month.

Prime Minister Ismail Sabri Yaakob, in announcing the approval for further withdrawals of up to RM10,000, had said it was a “difficult decision” as it involved savings meant for the people’s old age.

He also said it was to alleviate the burden of those facing financial pressure due to the continued effects of the Covid-19 pandemic and the recent floods.

Applications for withdrawals began on April 1 and will continue until the end of the month, with payments made from April 20 onwards.

Zulkiply Omar, a senior fellow at Universiti Malaya’s Social Wellbeing Research Centre, said this was a cause for concern as some contributors might view their retirement savings as extra spending money despite not being in dire straits.

“This is what we are worried about, because not everyone is in desperate circumstances,” he told MalaysiaNow.

“There’s no denying that some who are mired in debt are truly at the end of their rope, but given half a chance, there are others who would withdraw their money for no good reason.”

Amanda Yeo of think tank Emir Research meanwhile said that this latest round of withdrawals might help families from the low-income bracket cover expenses such as duit raya for friends and relatives.

“Some contributors might also use their EPF funds to buy new clothes or to pay off accrued expenses such as rental, loan instalments or education fees for their children,” she said.

Nevertheless, she said it would not be appropriate to make EPF withdrawals just to cover additional expenses, adding that the permission given this time around was only to help those in need.

She also emphasised the EPF’s own warning that some 6.1 million contributors currently have less than RM10,000 left in their accounts.

“As of October 2021, 3.6 million contributors had less than RM1,000,” she added. “Of these, two million were Bumiputeras.”

‘Retail therapy’

From a psychological point of view, Fauziah Sa’ad of Universiti Pendidikan Sultan Idris said many would see the opportunity for withdrawals as a way to release stress as they try to adjust to the so-called new norm.

Speaking to MalaysiaNow, she said it was normal for people to spend or to go on shopping sprees during times of stress.

She said it would come as no surprise if the same were to happen with EPF savings during the Hari Raya celebrations.

“Imagine being in financial difficulty for two years, and then suddenly you get a windfall of RM10,000. Of course many would welcome this,” she said, adding that such reactions had been widespread on social media in the wake of the government’s announcement.

Given that the money belonged to the contributors who had worked hard for it, she said it was up to them how they wished to spend it.

However, she urged the people to exercise prudence when it comes to spending their retirement savings.

Zulkiply meanwhile said that EPF withdrawals could spur short-term growth as it would encourage people to spend.

“But this round of withdrawals is on a one-off basis, so any spending would likely stop at the short term,” he said.

Yeo agreed that businesses would benefit this year as Covid-19 restrictions are eased, paving the way for activities such as open houses and driving demand for food, raw ingredients, decorations and clothes.

“Nevertheless, the pandemic is not yet over and there are still those who are wary about holding big events like open houses,” she said.

“Businesses will still need time to recover from the losses suffered since the pandemic began two years ago.”