EPF & SOCSO 15 August 2012

Withdraw all your EPF at age 55 while still working until 60?

Now you can withdraw all your EPF at age 55 while you are still working with someone else if you choose to retire at later years, say at age 60!

However, you may voluntarily choose not to withdraw your retirement fund at KWSP if you don’t need that.

It was reported in a research conducted by KWSP that the amounts withdrawn by the members would normally be wiped out within 5 years! 

So, think twice before making any decision to withdraw all your monies in EPF accounts while you are still working and earning.

The government is not implementing the Employees Provident Fund (EPF) withdrawal at age 60 for private sector employees although the minimum retirement age has been extended to 60 years, effective January next year.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said private sector workers could still withdraw their full EPF savings at age 55.

“Following the government’s decision to extend the retirement age in the private sector, there were talks the EPF withdrawal would be extended from 55 to 60 years.

“At this stage, the government does not intend to implement the system. If they have EPF accounts, they could withdraw their full savings when they reach 55,” he told reporters here today.

Earlier, he presented robe materials, dates and zam-zam water to mosque committee members at the Tambun parliamentary constituency in Jelapang here.

According to the Minimum Retirement Age 2012 Act passed by Parliament recently, the compulsory retirement age for private sector workers has been raised to age 60.

According to the Act, employers may not force workers to retire before reaching age 60 and offenders could be fined up to RM10,000.

On the 1 Malaysia People’s Aid (BR1M) in the 2013 Budget, Ahmad Husni said the government was studying various initiatives to ensure operating and development expenditure benefited the country.

“We are in the process of preparing the Budget, BR1M is among the items being studied. The decision depends on whether the operating expenditure could be funded by government revenue, as well as the factor of the cost of living,” he said.

Following the ceremony, Ahmad Husni took time off to visit Bernama part-time journalist Tajul Safuan Abu Hassan who is suffering from a heart ailment at the KPJ Ipoh Specialist Hospital here.

He also presented a personal contribution to Tajul Safuan whose condition has been described as stable. — Bernama

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Author:
Ms. Angelina Ariel is the senior executive of NBC Group of Companies.
Angelina Ariel has written 74 articles for NBC Blog.

2 Comments

  • THE DANGERS OF PREMATURE WITHDRAWAL
    QUESTION TIME By P. GUNASEGARAM

    The overriding aim of the Employees’ Provident Fund is to provide for retirement, which favours a later withdrawal date.

    FIRST, we had this debate about whether the retirement age should be increased from 55 to 60 – employees and unions wanted the increase, the private sector and employers predictably did not and vehemently opposed it.

    And then after the retirement age was raised, the debate was extended to whether members of the Employees’ Provident Fund or EPF should still be permitted to withdraw their savings at age 55 or whether it should be at 60.

    Now the Government is planning to give members of the Employees’ Provident Fund or EPF the option of either withdrawing their EPF contributions at 55, the current withdrawal age, or anytime between that and 60, which is their new retirement age.

    The Human Resources Minister announced that there were plans to amend the laws to facilitate this. As we shall see, it is the wrong move to make as it will reduce retirement security.

    The facts were plain enough for raising the retirement age – life expectancy had gone up from about 50 at independence to about 75 now, an increase of 25 years, but the retirement age has stood at 55 (56 in the public sector, a move that the private sector pointedly did not emulate).

    People were living on average for 20 years beyond their retirement, and most of them went broke before they died, often in poverty and living on the charity of their children, relatives and homes for the aged.

    Most of the world had already moved to a retirement age of 60 and beyond and the most enlightened countries did not have a retirement age – you could work as long as you could or wanted.

    Countries have realised that you must not discriminate against the aged and they should be given opportunities just like anyone else as long as they are able to work. Crucially, that means most of them are able to support themselves better in old age.

    The increase in the retirement age is a step in that direction, although it would not fully mitigate the effects of supporting oneself in older age. The Government should consider increasing the retirement age even further in future.

    Now, despite legislation being passed, the private sector wants the raising of the retirement age to be postponed so that they have more time to cope – as if 50 years was not enough.

    The move should be implemented without delay despite the objections of employers who are keen to dump older, more expensive workers even if they are experienced in favour of cheaper, younger ones.

    The EPF is complementary to the increase in retirement age to provide for better support in old age. But inexplicably, the decision has been taken to allow contributors to withdraw their life savings in their late 50s even though they will be working until 60.

    That is an ill-considered move, even if the Malaysian Trades Union Congress has been pushing for it, because the EPF by law must consider always its role of providing for the future of its members. The less that is withdrawn before retirement age, the more there is at retirement.

    Already, there is a provision for withdrawing one-third of the EPF savings at the age of 50. And then there are other provisions for withdrawing for the purchase of houses and for investing in the stock market.

    The withdrawal for the purchase of houses may be justified because a house is a form of investment and often increases in value. And if it is owner-occupied, the rent which would otherwise have to be paid can be used to offset loan payments.

    But the scheme to invest in the stock market is somewhat pernicious. Management fees can be as much as 3% at first instance, and as much as 1.5% for each year after that to the investment manager. And this is payment for investing in what are supposed to be safe shares.

    In the moribund market seen these last few years, it is hardly worth the risk for the paltry returns. Better to keep the money in the EPF and earn 6% interest per year.

    At those management rates, such a scheme benefits more the fund manager than the EPF members.

    EPF would be doing its members a greater favour if it provided a list of shares for them considered blue chip, and then invested the money for them in these shares at its privileged broking rates. That would cut the cost of investment down to next to nothing and improve returns.

    But really, what is the point of allowing one-third withdrawal at 50? All it does is to reduce the amount of withdrawal available eventually.

    Now, the retirement age is 60. The whole idea of this is to maximise the period for which retired workers can remain independent. If they are working until 60, surely the best thing to do is to permit withdrawal of EPF funds only at retirement.

    Sometimes workers need to be protected against themselves. Already, EPF studies indicate that most workers exhaust their savings within a few years of getting them. So why give them the savings even while they are working?

    If you had RM100,000 now in the EPF and if you did not withdraw it, at a 6% interest rate per year, you would have RM134,000 five years later and RM180,000 10 years later. That is a very significant difference, and in practical terms means that a retiree can support himself for several years more.

    Instead, we are blunting the benefits of extending the retirement age in terms of giving them better security in old age by allowing them to withdraw all their savings in the EPF at 55 – a full five years before they retire.

    That’s terribly short-sighted. It seems that the authorities are completely oblivious to the dangers of premature withdrawal!

    > P. Gunasegaram is often appalled at the lack of thinking that goes into our most important of policies.

    Source: TheStar (16 August 2012)

  • P. GUNASEGARAM is my favorite writer & commentator since he was the editor of The Edge.

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