Malaysians struggling to make ends meet will be allowed to withdraw money from their pension fund, at the expense of their future retirement plans.
Malaysia has approved a special withdrawal from retirement savings of up to 10,000 ringgits per person (US$2,400) so that Malaysians can cover their immediate needs. Half of the pension fund contributors under 55 don't even have it.
Managed by Malaysia's Ministry of Finance, the Employees Provident Fund is the mandatory pension fund for private workers.
The fund has nearly 15 million members, of which 7.6 million sent for RM78 billion ($18.5bn) on their accounts in 2020. Contributors will then be able to withdraw about a year contributions from the EPF.
This special withdrawal on the EPF is allowed because many Malaysians are still struggling to make ends meet as the COVID-19 pandemic severely affected the country's economy. Malaysia's economy declined 5.6% in 2020 with almost 6% of Malaysian households living in absolute poverty as of July 2020, according to World Bank data.
The move was called by several politician leaders, including the former prime minister and the opposition leader.
The decision is actually the fourth of the kind since the start of the COVID-19 pandemic. Members have already withdrawn for a total of RM101 billion ($24bn), more than twice as much fund dividend payouts for an entire year.
Only 52% of members under 55 have more than RM10,000 left now, according to the minister of Finance Tengku Zafrul.
Moreover, the move will require the EPF to sell investment assets in volatile market conditions which would negatively affect dividends, Zafrul said on Monday. Previous withdrawals lowered returns on savings by RM5.4 billion ($1.3bn). Meanwhile, 5.3 million members didn't withdraw any money from their savings. For the minister, the decision as such affects all members, not only those in urgent needs.
"This is a tough decision because it involves the retirement savings of the people. This special withdrawal is a middle path to balance out the pressing needs of today and the future savings," Prime Minister Ismail Sabri said on March 16.
The prime minister however urged people not to sacrifice their pension savings if it is not necessary.
Only members of the EPF aged below 55 will be able to apply for a withdrawal from April 1 to April 30.