EPF uneasy 'despite millionaires'

KUALA LUMPUR: THE number of millionaire account holders is on the rise but the Employees Provident Fund is far from impressed.

"EPF public relations general manager Nik Effendi Nik Jaafar says despite having more millionaires, 73 per cent of contributors had less than RM50,000 in their accounts."

In the third quarter of last year, the number of its millionaire account holders had increased to 15,783 from 11,174 previously, with total savings of more than RM1 million.

The figure of those reaching the mark was predicted to rise significantly this year, mainly because of higher salaries and awareness for better money management, said EPF public relations general manager Nik Effendi Nik Jaafar.

Also last year, 5,842 members had between RM800,001 and RM900,000 in their accounts while 4,351 members had between RM900,001 and RM1 million.

This was an increase from 4,415 members (RM800,001 to RM900,00) and 3,165 members (RM900,001 to RM1 million), respectively, in 2011.

"This higher contribution rate of between 23 and 24 per cent could be because of factors such as higher salaries and the awareness for better money management."

Despite the growing numbers, Nik Effendi said EPF savings were far from satisfactory as the majority of members had low savings.

"The 15,000 millionaires do not represent the masses. It is still a small portion of the total population," he told the New Straits Times yesterday.

EPF's 2011 statistics showed that 73 per cent of contributors had less than RM50,000 in their EPF accounts.

This, Nik Effendi said, was a worrying trend as the majority of members tend to deplete their savings within three to five years.

"That is a small amount and we worry that it will not be enough to sustain them during their golden years," he said, adding that this was the main reason EPF had been the major advocate for minimum wage and the minimum retirement age.

He said if the minimum wage was implemented, there would be an upward trend in the pay for employees as this would contribute to a better standard of living for retirees.

A high percentage of workers had lower wages, with 85 per cent of active EPF members earning less than RM3,000 a month.

As of Dec 31 last year, 40 per cent of households were in the "low" income bracket, with 1,697,284 active members (28.11 per cent) being in the RM1,001 to RM2,000 salary range.

This was followed by 1,439,703 active members (23.84 per cent) earning between RM500 and RM1,000 and 1,181,046 active members (19.56 per cent) earning less than RM500.

Only 786,631 active members (13.03 per cent) had received between RM2,001 to RM3,000.

"Lower wages mean lower contributions credited into their accounts, which mean lower savings for retirement."

EPF holds strongly to the belief that people should continue working for as long as they can to lengthen their retirement fund contributions and maximise their savings.

A study by EPF found that Malaysians retired early and had higher life expectancy of between 72 and 78 years. It was found that Filipinos, who had a lower life expectancy rate of 66 to 72, retired at 65.

EPF retirement research section head Farizan Kamaluddin said many people did not realise how much money they would need for retirement and for any emergency.

She urged members not to withdraw their savings in one lump sum upon reaching 55.

The amount of lump sum withdrawals in the third quarter of last year made by those aged 55 amounted to RM1,692.66 million, or 39,196 approved withdrawals.

"The best way of stretching your retirement finances is to leave more in the account so that you can gain more profits from the dividends," Farizan said.

She added that although members relied heavily on EPF as their main savings for retirement, they should have other financial planning as well.

"Diversification of your savings and investments could help increase your finances, say, by saving in banks or with Amanah Saham Bumiputera.

"People must know that healthy ageing does not stop at living healthily. You must ensure you have enough money to live on for the next 15 to 20 years after your retirement," she said, adding that this was also to ensure wellbeing and harmony in the family.

She said that assuming if Malaysians retired at 60, spending RM800 a month over 15 years would require a savings of RM144,000.

"This, of course, will depend on your needs and requirements, as well as the state of your health and lifestyle."

Malaysia will be an aged nation in 2030, with more than 15 per cent of the population at 60 and above, coupled with a low mortality rate.

copy from: http://www.nst.com.my/nation/general/epf-uneasy-despite-millionaires-1.215014