(Image: EPF)
The Employees Provident Fund (EPF) is set to see RM5 billion in withdrawals from Akaun Fleksibel (Account 3), which economists say could help boost the national economy. They believe that higher dividend payouts and easy access to funds make EPF accounts more appealing than regular bank savings. However, they warn against depending on withdrawals as a main factor for economic growth.
Bank Muamalat Malaysia’s Chief Economist, Mohd Afzanizam Abdul Rashid, highlighted that private consumption makes up 61% of Malaysia’s GDP.
“If EPF members spend their Account 3 withdrawals, it will be a boost to the GDP. But certainly, we should not rely on such withdrawals as the primary tool to grow the economy.”
(Image: Mohd Afzanizam Abdul Rashid/Focus Malaysia)
He also assured that past data shows that higher dividends and an expanded Account 3 would not led to irresponsible withdrawals.
“The EPF has revealed that 70% of its members tend to keep their savings with EPF under the Akaun Fleksibel. So only 30% withdrew from it for various purposes. I suppose it is the opportunity cost for spending the Account 3 withdrawal versus keeping the money with EPF.”
Afzanizam emphasised that EPF consistently offers high dividends above the long-term inflation rate of 2.5%.
“In that sense, EPF contributors would really need to do their due diligence before deciding to withdraw and spend, versus what they stand to gain if they just let their savings grow until retirement”.
He stressed the importance of financial literacy and cited the EPF’s Belanjawanku report, which includes a framework for measuring retirement savings adequacy.
“This will help contributors benchmark themselves with their existing savings and on how much they should keep in order to align themselves with the savings benchmark”.
(Image: Geoffrey Williams/The Star)
Economist Geoffrey Williams pointed out that RM7.3 billion of the RM73.24 billion dividend payout would go to Akaun Fleksibel contributors, potentially boosting consumer spending and economic growth by 1% to 1.2% of GDP.
“That could be RM7.3 billion in potential extra consumer spending if it was all transferred and spent. Since there is a multiplier effect, this could add between 1% and 1.2% to the GDP.”
However, he noted that this shift from savings to spending doesn’t directly increase economic productivity.
“It is a demand push increase in GDP, not supply side growth”, he said adding that EPF’s high dividends are risk-free and “very attractive compared to normal deposits”.
“The Akaun Fleksibel allows withdrawals and it makes EPF accounts more attractive than savings accounts in banks. So, we can expect and we are seeing an increase in voluntary contributions.”
EPF had on Saturday declared a dividend rate of 6.30% for both Simpanan Konvensional and Simpanan Shariah for the year ending 31 December 2024. The highest since 2017! The total payout is RM73.24 billion, with RM63.05 billion for Simpanan Konvensional and RM10.19 billion for Simpanan Shariah.
(Source: The Star)