Millions of Malaysians dip into retirement savings to make ends meet

Faced with rising costs and low wages, cash-strapped Malaysians jumped at the chance to drain billions from the mandatory savings fund

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Malaysian ringgit banknotes. Nearly 3 million people collectively withdrew about 7 billion ringgit from Malaysia’s Employees’ Provident Fund last month. Photo: Shutterstock

Published: 12:00pm, 6 Jul 2024Updated: 12:15pm, 6 Jul 2024

Millions of Malaysians have been raiding their retirement savings to cover living expenses after changes to the country’s mandatory savings fund allowed billions of ringgit to be drained out of it in a matter of weeks.

Prime Minister Anwar Ibrahim’s administration restructured Malaysia’s Employees’ Provident Fund (EPF) in May following sustained public pressure for more direct access to retirement savings.

Kahirul Hamdan, 29, was among the nearly 3 million people who collectively withdrew about 7 billion ringgit (US$1.5 billion) from the EPF in the four weeks following the changes.

“I know I don’t have much saved up for my retirement, but we really needed the money at the time,” said the car mechanic, who earns about 3,000 ringgit (US$636) a month and pulled 1,000 ringgit out of his EPF account.

In the first year after the restructuring, 25 billion ringgit is expected to be withdrawn from the EPF, which had some 1.19 trillion ringgit under management as of the end of last year.

Malaysian Prime Minister Anwar Ibrahim’s administration restructured the EPF following public pressure for more direct access to retirement savings. Photo: Bloomberg

Private sector employers are required by law to match their employees’ monthly contributions to the fund, which was established in 1951. Civil servants have traditionally been covered by a separate, tax-funded pension scheme, but the government has announced plans to eventually transition them to the EPF as well.