Lower starting salaries, Covid withdrawals among factors behind low savings, says EPF

Lower starting salaries for those who began their careers before the implementation of the minimum wage in 2013 are among the factors contributing to Employees Provident Fund (EPF) members aged between 40 and 54 having less than RM10,000 in savings, the retirement fund said today.

In a statement, the EPF said another factor was structural wage challenges, whereby 44% of EPF’s contributors earned less than RM2,000 and 81% had an income of less than RM5,000.

"There are also inconsistent contributions due to members shifting in and out of the formal sector, where only 45% of the 4.81 million members in this age group made contributions in 2022, while the rest did not contribute at all last year.

"In addition, only half of the private sector labour force who are under formal employment contracts are mandated to contribute to the EPF. The remaining comprises individuals in other sectors, such as agriculture or informal work, or contract workers and business owners," it said.

It added that 59% of the 2.85 million members in this age group had applied for Covid-related withdrawals, withdrawing more than RM62 billion in total.
 
As of the end of December 2022, there were 4.81 million EPF members in the 40-54 age range, 2.17 million of whom were active members and 2.64 million of whom were inactive members, defined as having made no contributions in the past year.

The EPF meanwhile welcomed the government’s move to contribute RM500 on a one-off basis to both active and inactive members, to encourage more Malaysians to increase their retirement savings.

It said the incentive would serve as a catalyst for members to rebuild their savings and achieve a dignified retirement, which in turn would help mitigate the impact of Malaysia’s rapidly ageing population.

Prime Minister Anwar Ibrahim, when tabling Budget 2023 on Feb 24, said the government had agreed to raise the EPF Account 1 contributions by RM500 for members aged between 40 and 54 years with less than RM10,000 in savings.