Sunday, November 05, 2017

EPF - 68% EPF members have less than RM50,000 - will last only 4 1/2 years? UMNO-BN Failure?

Employees Provident Fund - Savings for 'OLD AGE' - Well, here again is another FAILURE of the UMNO-BN government.

More than two-thirds (68%) of EPF members aged 54 had less than RM50,000 in EPF savings! With the household poverty line income at RM930 monthly, RM50,000 in savings will only last 4½ years. The bottom fifth of EPF members have average savings of only RM6,909!
This is a problem for all Malaysians - if people do not have enough to live their old age...should we just let them DIE... Desperate people may resort to desperate measures including crime (has the number of petty crimes on the rise? Some may even resort to drug trafficking, etc...). Malaysia, as a nation, a community of people, is responsible for the wellbeing of ALL - and here is where our UMNO-BN government has failed us badly. It is disgusting seeing how some have become so RICH...more disturbing when these are wakil rakyat(people's representatives), their family members and 'friends' - whilst the rest of Malaysia is in dire straits...How much are people in government-owned companies earning? How much is the PM and other 'government' leaders earning? 

A worker is never expected to be working and earning income until he/she dies...A worker is expected to RETIRE(Stop working) and have enough money to survive on until he she dies...and at present, Malaysian life expectancy at birth in 2015 was 72.5 years for males and 77.4 years for females.

There are about 14.5 million workers, and only 48% have EPF Accounts. There are about 1.5 million public servants, who are covered by the Federal Government pension schemes. And that still makes a lot of workers in, amongst others, those in the informal sector, those casually employed, those in farming and self-employed who do not have active EPF accounts. 

"...More than two-thirds (68%) of EPF members aged 54 had less than RM50,000 in EPF savings! With the household poverty line income at RM930 monthly, RM50,000 in savings will only last 4½ years. The bottom fifth of EPF members have average savings of only RM6,909!..."(see Star Report below)
"...Assuming someone lives until 75, with no major medical expenses and outstanding debt, average savings of RM194,000 would bring RM25 per day, or only RM810 monthly...."(see Star Report below)

Well, sadly most of the workers would not be even having RM194,000 in their account - so what will happen to them after a few years - how will they survive their old age...

Guess what - when you retire, will you still have to make housing loan and car payments beyond 55 or 60 years of age?

With the decline of regular employment, and the rise of 'short-term' employment ...and, of course, many will even be able to get employed after they reach 50 years...

UMNO-BN government to be blamed for this VERY BAD NEWS for many Malaysians - How will they survive?

A government is responsible for the well-being and welfare of ALL its citizens and their families...And, this 'problem' should have long been overcome to ensure that all Malaysians will be financially secure to survive in Malaysia until they die at age 75 or later...

Neo-Liberalism(a new word for 'capitalism') seem the way UMNO-BN government has been going, including under this Prime Minister Najib. The move of late, is that 'if you cannot afford to pay for goods and services...then you do not get it" - hence, the government has been removing subsidies,...and even starting to 'privatize' or 'corporatize' things ...Healthcare too has been affected, after IJN has taken over healthcare and is charging tens of thousands of ringgit for treatment...(Public servants and pensioners are exempt - but not the rest of Malaysians). Tols, increased tariffs for basic things like electricity, communication, sewage treatment, water...

Malaysia is foolish to adopt neo-liberalism, as we all know how the US has failed using this capitalist model - and now have a problem of a large number of homeless/poor ...

Najib has been talking about 'high income nation' - I do not think he is talking about raising the income of Malaysians... Look at the Minimum Wage - RM1,000 it is really too low for a worker and his/her family to survive. Wages are so low that it is no longer possible for sole bread winner families to survive - now both husband and wife need to work - and that creates new problems ...who will take care of the Kids? Domestic Workers?

'Savings for Old Age' - We should not have touched this...but then, we the country was facing financial problems, our BN-UMNO government strategy was to 'allow' workers to take money from their EPF saving to spend houses, etc...A major blunder, as that it simply reduced the amount of monies we will have for our old age... 

Then, our government have been encouraging us to buy own houses...and take almost 100% housing loans...where in many cases, it means making loan payments for 30 years...A house costing RM200,000...and if the interest rate is just 5%(which it is higher in most cases), that roughly makes the cost of the house about RM500,000...Problem is public servants get transferred around, and with short-term employment contracts, people are forced to move to other places...and the houses 'bought' may no longer be where we are staying we end up paying rental and also loan payments. Should this 'need your own house' policy promoted by UMNO-BN ought to be reviewed and discarded? How many are still paying monthly loans after the age of 55 and/or 60?

PROBLEM NOW - What are we going to do to these 'old folk' in Malaysia - who will not have enough money to 'survive'? 

RM1,200 BR1M is RM100 per month will not be sufficient? Look at how much is the monthly assistance for the poor provided by the Welfare Department - it is way too low.  

Household poverty line income per household - RM930 monthly (that used to mean income of husband, wife and maybe 3 kids - what is it now?). That is RM6.20 per person per day - is it sufficient for a family today - rental(or house loan), electricity, water, sewage, TV, phone, transportation, food, clothing, ...Is it really enough? Let us get a more realistic poverty line income per household (meaning family unit). **

15 workers living in one house earning RM1,000 - Household income is RM15,000 per month? So, Najib tell us what is the family income(husband, wife and kids?). Poverty line income per household gives an unclear picture - tell us about family income..or individual income


Malaysian Household Improving? What about family income? Individual Income?

RM4,585 - median monthly household income for Malaysians in 2014? 4.5 million households entitled to BR1M?

Average household income is RM5,900 per month? 1 earns RM500K, and 99 earn RM900 - gives average of RM5,000plus




Most Malaysians cannot afford to retire

Analysis Wednesday, 25 Oct 2017 6:11 PM MYT

Retirement Advisory Service section at EPF Petaling Jaya branch.
Retirement Advisory Service section at EPF Petaling Jaya branch.

MALAYSIA is ageing, and the population over 65 should come to 15% of the population by 2035. Current Employees Provident Fund (EPF) savings for most Malaysians are barely enough for a decent life after retirement.

Meanwhile, Malaysian life expectancy has been rising. Life expectancy at birth in 2015 was 72.5 years for males and 77.4 years for females.

Assuming someone lives until 75, with no major medical expenses and outstanding debt, average savings of RM194,000 would bring RM25 per day, or only RM810 monthly. Of course, this crude analysis does not consider many factors, but the picture is clearly dire.

Poor EPF returns

This year, EPF raised the minimum savings target by age 55 from RM197,000 to RM228,000. But only 18% of members have this much, far short of its target of getting at least half its members to meet the minimum level by 2021. Low investment returns and withdrawals permitted – for housing, health and education – imply even less for retirement.

More than two-thirds (68%) of EPF members aged 54 had less than RM50,000 in EPF savings! With the household poverty line income at RM930 monthly, RM50,000 in savings will only last 4½ years. The bottom fifth of EPF members have average savings of only RM6,909!

According to EPF, 70% of members who withdraw their funds at age 55 use up their savings less than a decade after retiring. Most EPF savings are therefore not enough to stay out of poverty after retirement.

There are 32 million people in Malaysia, with 69% of the population of ‘working age’ between 15 and 65. Only 48% of the labour force of 14.5 million have active EPF accounts.

Around a tenth works for the Federal Government and are eligible for pensions, contributing to other pension funds, such as the KWAP (Kumpulan Wang Persaraan [Diperbadankan]) and the LTAT (Lembaga Tabung Angkatan Tentera).

Others remain uncovered. Many employees, in the informal sector and others casually employed, do not have active EPF accounts, while many in farming and the informal sector are self-employed.

EPF assets diversified

A late colonial innovation from the early 1950s, EPF is now the world’s seventh largest sovereign pension fund in terms of total assets. In its early decades, EPF had to buy relatively low yielding government bonds, providing the government with a steady source of cheap funds. By 2015, its investment assets were RM685bil, after growing about 10% annually over the previous 15 years. EPF held considerable assets in ‘cash’ in the past.

Investments in traditional, lower risk, domestic, fixed income assets, especially Malaysian government bonds, remain significant. Of ‘held-to-maturity’ (HTM) investment assets, EPF has been accumulating Government sukuk (‘zero coupon bonds’) holdings. By 2015, these came to 29% of total HTM assets, rising rapidly from 2.7% in 2006.

Since the 1980s, EPF has become increasingly market oriented, and has been investing abroad since 1996. Over the years, riskier assets have come to account for increasingly large shares of total investment.

Ostensibly in search of higher returns, EPF’s foreign investments have grown. Investments in equities and properties abroad have been rising in recent years. EPF has gone into foreign markets since 1996, with investments in equity, fixed income yielding assets and real estate, especially in the US, UK, Singapore, China and Australia.

Significantly, it is now allowed to be a major investor, or even operator of businesses, i.e., well beyond being a passive portfolio investor -- a significant departure from past practice. This has undoubtedly affected the context, management incentives and governance of the fund, opening the door to abuse of various kinds.

Holdings in other asset classes, especially equity investments, have grown in recent decades. Direct real estate and infrastructure investments, such as toll highways and waste management, have grown since 2011, most significantly, its 49% stake in PLUS costing RM9bil in 2011.

EPF declared a dividend of 5.7% for 2016, to its 14.72 million members, with a total pay-out of RM37.2bil. Total gross investment income was RM44.2bil in 2015, with domestic (52%) and foreign (48%) sources contributing almost equally. While income from interest, profits and dividends remains stable, capital gains accounted for more than a quarter of EPF income in 2015.

Why EPF returns are low

As EPF savings do not provide most retired employees with enough to live above the poverty line after retirement, it is failing to serve its intended purpose. For over four-fifths of members, poor returns to their EPF savings will prevent them from retiring in comfort. Clearly, depressed wages, low EPF investment returns and high household debt are not serving most Malaysians well.

EPF and other retirement fund professionals need to be allowed to do their jobs to best serve their primary stakeholders, namely retirees, current and future. But political interference is preventing EPF professionals from serving members’ interests better.

Such political intervention in investment decisions does not inspire either EPF members or public confidence. In the past, EPF members were resigned to low returns as their funds were mainly used to buy government bonds offering low returns. With EPF investments more diversified in recent decades, EPF returns increased, but not by much.

Hence, EPF members do not appreciate their retirement funds being used to buy low yielding US infrastructure funds.

The Malaysian public does not want government leaders to sacrifice their interests to curry favour with a foreign leader, especially one who has never offered any concessions to advance our national interests.

* Jomo KS is a Malaysian economist expressing his own views. - Star, 25/10/2017


Should we work till we drop?

Mariam Mokhtar
 | October 28, 2017

How will the prime minister deal with the country's ageing population whose EPF savings are insufficient for a decent retirement?

In the olden days, a couple would raise a large family to help in the fields. When they grew old, their children would care for them.

Today, we hear stories of grandparents dumped at bus-stops with all their possessions crammed into a single plastic bag. It is becoming more common for families to leave their aged relatives to die in nursing homes?

On October 25, Malaysian economist KS Jomo, issued a stark message about Malaysian retirees, although it is doubtful if many people heard him. He warned that retirees were unable to live comfortably on their retirement savings, and that depressed wages, low EPF investment returns and high household debt, were failing Malaysians. 

The age factor: Jomo said that by 2035, people who are 65 years or older will comprise 15% of the population. He also postulated that the person who retires at 55, with no major health problems or outstanding debt, and savings of RM194,000, would have to survive on RM25 per day (or RM810 per month).

This is not much. So, how will the government address this problem? Should employers raise EPF contributions and can employees afford to have a greater deduction from their wages? The cost of living is already high and EPF payments may still not be enough to provide a good retirement.

Young supporting the old, migrants versus local workers: Although the EPF has raised the minimum savings target by age 55 to RM228,000 from RM197,000, Jomo warned that only 18% of EPF members had amassed that amount of money, and that it seemed likely that only half of EPF members would meet this revised minimum level by 2021.

He also said EPF records showed 68% of EPF members who were 54 years old, had less than RM50,000 in savings. If that was not bad enough, he said that the bottom 20% of EPF members, had saved only about RM6,909.

Is Malaysia a victim of its own economic success? We import foreign labour and this depresses wages. So, few locals are willing to do the jobs which are now done by economic migrants and foreign labour. We have lost many of our best brains to foreign countries, but we happily accept foreign labour, to the detriment of our own workers.

Low investment returns and non-active EPF accounts: Jomo highlighted the EPF’s low investment return and said that after people had withdrawn money from their EPF accounts for housing, health and education, they may not have enough left for retirement.

From a population of 32 million, 69% were of “working age”; however, Jomo claimed that only 48% of the 14.5 million of the population who were actually holding jobs, had active EPF accounts. Those in casual employment, or the self-employed, do not have active EPF accounts.

One retiree said, “I do not agree with an increase of the retirement age. I do not wish to work till I drop, nor do I want to face a life of poverty, after retirement.

“I have already exhausted my life savings and am now dependent on my children.”

Another retiree said, “Some people cannot work beyond the current age of retirement, either because they have serious health problems, or because they are caring for an elderly relative.

“Jomo said that EPF investments have low yields. The PM went to Washington and invested EPF money in “making America great” again. Was he helping President Trump, or us?

“Will the EPF money dumped into the development of the Battersea power station help Malaysians or only Londoners?”

Mariam Mokhtar is an FMT columnist.
The views expressed are those of the author and do not necessarily reflect those of FMT. - FMT, 28/10/2017

No comments: