Much of life revolves around the trade-off we make between the present and the future.
As kids, our parents told us to “sacrifice” part of our play time for studies, so that we could get good grades, get into a decent university and finally land a rewarding job in the future. The balancing act of making concessions now for future gains has been ingrained in our collective consciousness.
In this pandemic era, the balancing act becomes all the more tricky as we sail into the uncharted choppy waters of public healthcare and economic crises. There are no case studies on how to walk the fine line between present needs and future concerns.
However, the Finance Ministry should be lauded for allowing Employees’ Provident Fund (EPF) contributors to withdraw from their Account I as announced in Budget 2021. It is a fine balancing act that offers immediate relief to the 600,000 eligible contributors yet does not totally rob them of their financial security, when they retire, some possibly long after the Covid-19 pandemic is over.
For many of the beneficiaries, who must show proof that they have lost their jobs, the monthly RM500 withdrawal for up to 12 months from their Account I is a lifeline, especially when work is scarce. As far as these contributors are concerned, it is better to have the additional RM6,000 over the next 12 months to tide them over, than that extra amount in their retirement piggy bank, possibly in the very distant future.
The Finance Ministry has rightfully put in place several measures to prevent abuse; even before the Budget was unveiled, there were concerns that the withdrawals could be used for lifestyle expenses like buying the just-released iPhone 12 or Playstation 5 gaming consoles.
The MOF’s restrictions to allow only those who had lost their jobs to apply for this, and even then, withdrawals are to be made monthly, have mitigated this risk.
Allowing EPF contributors to withdraw from their Account I means higher disposable incomes, which translates into more money in circulation, which will lead to increased economic activities – a crucial component in the country’s economic recovery plan.
The government has also reduced the statutory EPF contribution from 11 percent to nine percent starting 2021. Again, this increased liquidity in the market can help spur growth and keep the country on track to economic recovery post-Covid-19.
With luck, once the economic engine chugs along and gathers speed, the nation’s wealth pie will expand, not just making up for any shortfall used to cushion the current trying times, but raise depositors’ savings by more than what it would otherwise have been without the Account I withdrawals.
Having said that, the government needs to put in place a watertight monitoring mechanism to prevent abuse. It is heartening to note that as of September this year, some 54% of EPF contributors aged 54 and above have savings of less than RM50,000. With a rising life expectancy and costs of living, the statistics are rather grim.
But for now, the government has thrown a lifeline to not just the hundreds of thousands of EPF contributors, but also the fledgeling economy, which is in dire need of liquidity to kick-start growth. Allowing EPF contributors to withdraw from their Account I is a painful, bold decision by the government. But the move strikes the right balance between present relief and future well-being in an economy going through unprecedented times.
The views expressed here are strictly those of The True Net reader Patrick Loh of Kuala Pilah.