Malaysians are increasingly using up their Employees Provident Fund (EPF) savings before retirement, raising serious concerns over long-term financial security and drawing international comparisons with other retirement systems.
📉 The Big Picture: Withdrawal Trends and Risks
During the COVID-19 pandemic, a series of special withdrawal schemes allowed EPF members to tap into their retirement funds to manage job losses and rising living costs. As a result, more than RM145 billion was withdrawn by over 7.3 million contributors — significantly reducing the reserves meant to support retirement years.
New data suggests that many are exhausting their EPF balances soon after reaching withdrawal age. Reports indicate that one in four Malaysians deplete their EPF savings within five years of withdrawal eligibility, a trend also seen in countries with similar pension structures.
🧠 Why It’s Happening: Structural and Behavioural Forces
Several factors contribute to the accelerated drawdown of savings:
- Low wages and unstable contributions: With many workers earning modest salaries and a growing informal workforce, consistent savings into EPF are challenging.
- Immediate financial needs vs long-term planning: Many Malaysians prioritise short-term expenses like debt repayments and living costs over retirement planning, leaving little buffer for future security.
- Flexible access to funds: The introduction of structures like the EPF Flexible Account (Account III) makes it easier for contributors to withdraw funds for immediate needs — though this also risks undermining long-term retirement adequacy.
🌍 Lessons from Abroad
Global retirement systems offer contrasting approaches that could inform Malaysia’s policy direction:
- Stricter withdrawal rules: Some countries with mandatory pension schemes no longer allow early withdrawals, preserving a greater portion of savings for retirement. Analysts argue that limiting early access can strengthen long-term outcomes.
- Raising retirement withdrawal age: International bodies like the World Bank have recommended increasing the age for full pension access (e.g., from 55 to closer to 65) to better match longer life expectancy and ageing demographics.
These global examples show that balancing financial flexibility with retirement security is critical — especially as populations live longer and healthcare costs rise.
📌 What This Means for Malaysians
The growing trend of EPF depletion highlights a broader financial readiness gap among Malaysians. While immediate access to funds helps during crises, experts warn that without stronger saving habits and policy frameworks that encourage preservation of retirement assets, many may struggle financially in older age.