PETALING JAYA: Given the hardships faced by the people due to the Covid-19 situation, the decision to allow Employees Provident Fund (EPF) members to dip into their retirement savings is an understandable one, according to Principal Asset Management CEO Munirah Khairuddin (pix).
“The government is being very empathetic taking into consideration the hard times faced by the rakyat, from losing their jobs, a cut in their salaries, or their business may have suffered,” she told SunBiz.
On the whole, Munirah holds the view that retirement savings need to be continually replenished and that any drawdown should be avoided to ensure a disciplined approach to such savings.
She highlighted that, as a professional, one of her worries is the possibility of a pension crisis, as Malaysia is projected to be an aging society by 2030.
The CEO pointed out this is compounded by Malaysians’ longer life expectancy with the average mortality rate currently at 75 years old.
“If one stops working at the age of 55 or 60, that means they will be out of a job for about 20 years, while their EPF would only last less than five years on average. So who is going to support them in retirement?”
Earlier this year, EPF CEO Alizakri Alias was quoted saying that 71% of the public pension scheme’s contributors have less than RM50,000 in their savings.
On average, he said, EPF members have about RM47,000 in Account 1, while those below 30 years old have only about RM10,000 in Account 1. As for Account 2, the average savings stood at about RM13,000, with those below 30 having about RM4,000.
Alizakri estimated that this translates to RM208 a month on average, if the members live for another 20 years after retirement.
Similarly, according to a World Bank country report released in November, almost three-quarters of the working population at the age of 54 have balances under RM250,000 in their retirement savings account.
“Translated into an indexed annuity, almost three-quarters of workers will have a monthly benefit of less than RM1,050, only slightly more than the poverty line income of RM980 before its revision,” the report said.
With regard to the age-old cultural norm, – where the elderly rely on their children to get by – Munirah pointed out that there is a rise of the “sandwiched society”, an observed phenomenon where middle-aged adults are tasked with taking care of their parents as well as their own children.
With this, she cautioned that the burden to support those with inadequate pensions will ultimately fall on the government through healthcare subsidies and welfare programmes.
“We need to move towards becoming a more self-sustaining society, as a dip in retirement savings will lead to a downward spiral. Hence in many developed countries, the pension crisis is a real one.”
Munirah urged EPF members to get back on track with their retirement savings once their financial situation has stabilised, after the dust from the Covid-19 downturn has settled.
Commenting on the soaring retail participation in the stock market during the pandemic, she advised investors to know what they are investing in and not to follow the crowd blindly.
“There is a need to be a well-informed investor as the investment market has its risks and investors need to understand that.”
With the high volatility and uncertainty observed in the financial market now, Munirah said there will always be ups and downs to the stock market. As professional fund managers, she remarked, every fall presents opportunities.
“We always look for opportunistic investments and long-term investments. For professional fund managers, such volatility is acceptable as it is our job to look for good stock valuations,” she explained.
She pointed out that by leaving such a task to professional fund managers, people could invest according to their goals.
For 2021, Munirah said, Principal Asset Management is quite bullish on the stock market as the momentum from 2020 continues to grow.
