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Malaysia: Pension fund not short of money, says minister

The Straits Times

December 23, 2003

EPF has recovered from Asian financial crisis, and proposal to stop early withdrawals is only in the early stages.

KUALA LUMPUR - The government has assured Malaysians that the country's pension fund is not in financial trouble, following reports of proposals to stop pre-retirement withdrawals by contributors.

Second Finance Minister Jamaludin Jarjis said the Employees Provident Fund (EPF) had sufficient funds in excess of RM219 billion (S$98 billion).

The fund has 10.4 million contributors.

And the fund, he added, was growing at a rate of RM20 billion a year.

His remarks came in the wake of concerns that the EPF might be facing funding constraints when it toyed with the idea of doing away with certain pre-retirement withdrawals.

The fund had also thought about doing away with the lump sum withdrawal for contributors who retired.

The first time such an idea was floated was in 1998.

Addressing such concerns, Dr Jamaludin said: 'Previously, EPF's investments had suffered due to the Asian financial crisis. Now that it has recovered, EPF will have to make sound investment decisions to maximise returns.'

He said he was informed by the EPF's management that the proposal to restrict withdrawals was only at a very preliminary stage and had not gone to the board or the Cabinet.

The minister made these remarks when he was presenting a working paper on the Malaysian economy to mufti and ulama at the Syariah Committee and State Fatwa Convention on Sunday.

Concern over EPF savings was triggered earlier this month after EPF chief Azlan Zainol said that Malaysians contributing to the fund and nearing the age of 50 might not be allowed to withdraw one-third of their savings.

The change could be initiated to ensure that they have enough money in their accounts when they retire at 55, he said.

He added that the proposals were being considered by a committee formed to look into ways to maximise members' retirement savings.

They will be submitted to the EPF board soon and, if approved, the changes could be enforced by June next year.

Explaining the need to discourage pre-retirement withdrawals, Mr. Azlan said members were previously allowed to withdraw a third of their savings when they turned 50 to reduce their housing mortgage.

When the EPF divided savings into three accounts in 1994, which included a housing account, the pre-retirement withdrawal ruling was not abolished.

But this contradicted the original objective of letting members keep the money for their retirement, he said.

In the first six months of the year, members withdrew RM5.7 billion from the EPF, he said.

Workers, angered by the reports about the proposals, hit out at the idea.

They accused the EPF of trying to hang on to their money because of bad investments made by the key players running the national savings scheme.