Many Malaysians are facing financial difficulties due to the economic fallout from the Covid-19 pandemic.
The loss of employment and wage cuts have forced thousands of workers, particularly in the private sector, to tap their savings or their Employees Provident Fund (EPF).
More than half of the approximately 14 million private-sector employees in the country are active contributors to the EPF. Monthly contributions are mandatory by both the workers and their employers.
The sum adds up to some 20% of the basic wage, although certain employers make higher seniority-based contributions for some of their employees.
There are two methods available to make early withdrawals from the EPF to tide yourself over these hard times.
1. i-Lestari financial initiative
i-Lestari is a withdrawal facility from an individual’s second EPF account, amounting to RM500 a month. The scheme was set up to ease the financial burden of EPF members during the pandemic.
Despite the best intentions of the government, this scheme and other relief initiatives, such as lowering the minimum statutory contribution rate for workers from 11% to 7%, will negatively impact accumulated savings in the future, especially after retirement.
How does i-Lestari work?
You do not have to make a new application every month to withdraw funds. Instead, from May 2020 until May 2021, all registrants will automatically be able to withdraw their desired amount every month.
Registrations until May 2021 will also remain available. Those who send their forms late, however, will only see their withdrawals take effect in the following month.
Additionally, it cannot be backdated; you will withdraw your EPF savings from July 2020 until May 2021 if you registered for i-Lestari in June 2020.
Bear in mind that the amount of the withdrawals is subject to the total amount in your Account 2.
You will receive a reduced sum in future withdrawals if the residual balance is smaller than your applied for amount.
The monthly withdrawal amount submitted will be set when your application is approved and you cannot adjust the amount halfway during the scheme.
How to apply online for i-Lestari withdrawal
A special website solely for withdrawals under the i-Lestari programme was launched on April 14. EPF members can easily apply for i-Lestari withdrawals via ilestari.kwsp.gov.my.
Log in or use the EPF i-Akaun app on the official EPF website. Navigate to the page for withdrawals (which should be near the website’s top right-hand corner).
When asked what sort of withdrawal you want to make, pick New Application and then i-Lestari.
If you want to register by email, you will need access to a printer and scanner because the application form would need to be downloaded and filled in.
Scan and email it to [email protected] once you have filled up the form.
You can also directly mail your registration form to the EPF by post. During the MCO period, Pos Malaysia services are operational, so all you need to do is send the form to:
Kumpulan Wang Simpanan Pekerja
Karung Berkunci No 220
Jalan Sultan
46720 Petaling Jaya
2. EPF Account 1 withdrawal
The government’s proposal to encourage more EPF contributors to withdraw from their Account 1 has drawn mixed reactions.
Some oppose the proposal outright. Initially, the government intended to allow a monthly withdrawal of RM500 up to RM6,000 over a year, benefitting 600,000 qualified contributors.
The EPF said the i-Sinar programme is being fine-tuned and is the product of stakeholder consultation to ensure that donors can withdraw part of their savings and retain enough for their future well-being.
I-Sinar is an extension of the i-Lestari withdrawal facility, which is now projected to have reached an aggregate withdrawal of RM30 billion and will end in March 2021.
Applications for i-Sinar allowing withdrawals of RM500 per month for 12 months can be made from December this year and the balance will be credited to the bank accounts of the members from January onwards.
The drawbacks of withdrawal
The majority of Malaysians seeking assistance are those with lower savings in their EPF accounts.
The reduction of annual and cumulative dividends will gradually deplete the long-term savings of the most vulnerable low-income families in the long run.
Second, as many Malaysians do not have active EPF accounts, they will not benefit from this scheme.
Some 62% of the 22 million Malaysians of working age are self-employed and not protected by any formal social security.
How then will they manage as a result of the lack of income?
Another alternative: Make use of existing government assistance
To get through these very tough times, using their savings in Account 1 should not be the only way for EPF contributors to get cash.
Pointing this out, EPF chief executive officer Tunku Alizakri Alias noted that through PRIHATIN, PRIHATIN SME+, PENJANA and KITA PRIHATIN, the government has provided direct financial assistance amounting to RM55 billion for the B40 and M40 income groups as well as other focus groups and newly vulnerable groups.
This article first appeared in MyPF.
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