How will they survive? Charles Hector wonders if this is another failing of the BN government arising from its delayed implementation of the minimum wage.
Based on statistics, more than 75 per cent of retirees reaching the age of 55 have less than RM50,000 in their EPF savings. Obviously that amount will not carry the employee through for the remainder of their life.
The Employees Provident Fund was a ‘simpanan hari tua’ (savings for old age) scheme for workers – but alas, this government, possibly to help the ‘economy’, allowed workers to dig into these savings and use the money NOW for a variety of reasons. The end result was a shrinking of these savings – and no more would it be possible for many people to rely on these savings to sustain their livelihood until death.
Now, people have become dependent on this money now, and there would be resistance to any proposal to freeze the taking out of this money now and allowing the EPF beneficiary only the ability to take the money upon retirement. See how many workers protested the idea that they would only have access to this money at 60, the new retirement age. If one can work and earn until 60, workers should not be allowed access to this money until after they stop working…
Does the Malaysian government even guarantee this money in your EPF account? Does the Malaysian government even guarantee an annual minimum interest rate of 8 per cent or 10 per cent?
Now, the EPF is using EPF money to invest overseas. What happens if the investment does not reap better benefits or, worse, is lost. Then workers will suffer. It is thus important that the Malaysian government guarantees these ‘savings for old age’, and even guarantee a minimum 8 per cent annual interest on money available.
If a person retires at 60, and lives on until 75, how much would he need to survive. Let us take it to be RM1,000 per month
1,000 X 15 X 12 = RM180,000
If RM1,500, then 1,500 X 15 X 12 = RM270,000
It looks like more than 75 per cent of workers under this EPF scheme would now not have enough to survive, and the way the price of food and the cost of living is increasing, this is a major problem which needs to be addressed now…
Maybe, we can try to reduce the cost of living for people above 60 – totally free health care, free public transport, monthly allowance of RM500, free water, electricity, phone, sewage treatment, TV, internet… [Remember that the elderly usually needs more to survive - i.e. health care, care givers, etc ]. Of course the rich would be excluded …
If workers had been made better wages – a just living wage – we would have a ‘smaller problem’ – but this Malaysian government only introduced minimum wages recently, and some workers are still being denied even this.
Now, there are many, many people who are self employed – farmers, fisher-folk, etc – who do not even have such a ‘scheme’ in place (no pension, no EPF, no insurance, etc) … and the government must determine the numbers that would need assistance in their old age…
We should help elderly Malaysians retain their dignity. We certainly do not want them to become ‘beggars’ relying on the goodwill of others for their survival. Respect for elders is a value that all Malaysians hold dear, and as such, it is essential that something is done now to ensure that we will take care of all our ‘golden’ Malaysians.
WHILE it is important to set aside a portion of your income for your golden age, many find it hard to decide where to put their hard-earned money. Employees are often choosy and sceptical in selecting the right financial instruments to invest in, other than keeping their money in the bank.
It is not often that one can rely on one’s EPF savings alone to sustain oneself through one’s retirement age.
Malaysian Employer Federation (MEF) executive chairman Shamsuddin Bardan says it is not because people are not contributing enough to the EPF, but instead, it is the leakages in the system that limits its full purpose.
“Based on statistics, more than 75% of retirees reaching the age of 55 have less than RM50,000 in their EPF savings. Obviously that amount will not carry the employee through for the remainder of their life,” he says.
Cumulatively, both employer and employee contribution would amount to between 23% and 24% of wages being contributed to the EPF on a monthly basis. “A lot of withdrawals are allowed on education, medical, housing loan, and so on. Obviously when one reaches one’s retirement age, the money is not there anymore. In fact, it is very much reduced,” says Shamsuddin.
The Government needs to look into putting the EPF savings back on track, he says.
“It should not be utilised for anything else except for “old age” purposes. Perhaps if you want to buy a house, you would have to use other means. This is so your savings will be intact. Then, at retirement age, you would have enough to carry you through,” he says.
The new retirement age policy allows employees to continue working until the age of 60, compared with 55 previously. This represents an additional five years of contribution to EPF savings.
“That would beef up employees’ savings,” he says.
However, one can withdraw one’s entire EPF savings when one reaches the age of 55. This is not in sync with the new retirement age. If an employee works until the age of 60, but fully withdraws his EPF savings at the age of 55, by retirement time he would be left with only five years of contribution.
Shamsuddin says this misalignment is yet another issue the Government needs to look into. “Although it won’t be a popular thing for the Government to change the withdrawal policy to age 60, we need to have a hard look at that, and perhaps bite the bullet and change it. Or else, the increase in retirement age with the main purpose of enhancing retirement savings would not be achieved,” he says. – The Star, 10 August 2013, ‘PRS a good idea but may not be enough’