PETALING JAYA: Employees’ Provident Fund (EPF) members will lose more than RM10,000 in their retirement funds by withdrawing the amount now, reminds an economic advisor.

Datuk Chua Tia Guan, head of Asia Business Centre, said the only exception is when the EPF member is a savvy investor.

He said this when asked to comment on the pros and cons of the government’s move to allow EPF members to withdraw up to RM10,000 now.

Chua said unless one is a savvy investor capable of earning higher returns than EPF, withdrawing the old age savings now is not a wise move.

He said the average savings interest rates offered by banks is about 2% while the average EPF dividend rate is 6% which is much higher than banks.

Chua said based on the calculation of 5.5% of annual dividend, a 30-year-old who withdraws RM10,000 now will lose RM49,840 in EPF savings when he reaches the age of 60.

He opined that unless one has reached a critical stage whereby he is left with no other choices, Chua does not support the idea of early withdrawal from the EPF.

He said early withdrawal does not only affect one’s retirement life but will also be a burden to the country.

Chua, who is also director, tax and financial consulting of Asia Business Centre, said one should not withdraw one’s EPF savings unless the money is desperately needed to settle a financial crisis.

“EPF members who do not have sufficient savings for retirement will be worse off if they were to withdraw RM10,000 now,” he said.

Based on EPF statistics, the savings of 97% of EPF contributors are insufficient for retirement.

He urged those who have planned to withdraw their EPF savings now to reconsider their decisions.

Chua suggested that EPF members well versed in investment treat their EPF savings as part of their investment portfolio.

“Basically, the returns of EPF will not be less than 2.5%, which is the inflation rate,” he said.

Chua also said people who have planned to withdraw from EPF for reserve should have strong financial discipline and are prudent in spending.

He is worried about EPF members not having sufficient savings for their retirements.

The government would be the one to distribute relief funds to help them, he said.

To minimise the impact of withdrawal, he proposed the government to verify before allowing withdrawals.

“The government can release 20% of the withdrawal sum first and the balance 80% after verifying the financial status of the applicants,” he said.

Economist Dr Nungsari Ahmad Radhi, in an interview with Sinar Harian, said he did not agree with the government’s move of allowing a maximum of RM10,000 withdrawal from EPF savings.

He said such a move had contravened the objective of saving for retirements.

“If we continue to use EPF funds in advance, this does not only affect members’ future but also reduce the functionality of EPF,” he said.

He also said the withdrawals would affect the capital market.

Dr Nungsari also quoted finance minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz who said the borrowing costs of government increased following a smaller pool of EPF fund.

“I disagree with the withdrawal. It does not help majority of EPF members who have less than RM10,000 in their savings,” said Dr Nungsari.

In the past two years, the government has allowed withdrawals in several schemes, including i-Lestari, i-Sinar and i-Citra for EPF members to meet their financial needs impacted by the COVID-19 pandemic.

Based on the figures provided by EPF earlier this month, about 50% or 6.1 million EPF contributors below the age of 55 have less than RM10,000 of savings for retirement.

As of 31 Oct last year, more than 7.4 million EPF members withdrew over RM101 billion from their accounts through i-Lestari, i-Citra and i-Sinar schemes.