THE depletion of savings in the low and middle income groups is worrying. Worse still, a survey has indicated a 50% drop in members’ confidence that their Employees Provident Fund (EPF) savings will sustain them in their old age.

       With depleted savings, the incidence of poverty among retirees will likely rise dramatically in the future.

       “I already see a surge in homelessness among senior citizens,’’ said former Inter-Pacific Securities head of research Pong Teng Siew.

       The extent of poverty among those in their twilight years is masked by the support commonly found in extended family structures in Asian societies.

       But this development will burden young families when their parents are unable to support themselves.

       Among the young, this problem is represented by their sharply falling savings rate.

       It means we will have to depend even more on foreign investments to plug the gap between savings and the desired level of investments in the country.

       “Failing which growth will continue the downward trend which is already witnessed in the past decade,’’ said Pong.

       Only 15% (compared with 30% last year) of Malaysians surveyed in a RinggitPlus poll, believed that their EPF savings can sustain them in old age.

       The EPF also warned that savings inadequacy among the working age population could lead to a severe retirement crisis as Malaysia is expected to become an ageing nation by 2030.

       Establishing a welfare state or forcing higher EPF contributions could be a solution but “both are rather controversial and must be done gradually,’’ said Etiqa Insurance & Takaful Bhd chief strategy officer Chris Eng.

       Malaysia does not have the deep pockets and cannot follow the path taken by countries where cash grants are given to help these affected groups to build back their retirement nest egg.

       We can only offer the usual targeted assistance and maybe, among other things, assistance in skills building and re-training.

       “The best course is to assist people to get jobs and businesses to flourish, increase trade and enhance the safety net over a period of time,’’ said Tricor Services (M) Sdn Bhd chairman Dr Veerinderjeet Singh.

       The numbers are staggering, with nearly half of EPF members having less than RM10,000 left in their accounts, miles short of the minimum retirement target of RM240,000.

       While the recent subsidence of the pandemic wave should start to pave the way for more concrete recovery, and hopefully, better employment and income prospects, the hole that has been dug is a deep one and would require tenacious efforts to be covered again.

       At the broad level, it also speaks of the need for better ways to stimulate the economy, should another downturn come around.

       The measures to allow for EPF withdrawals were made, in some ways, due to the lack of broader fiscal firepower and hence, limited room for direct government fiscal injections in the stimulus.

       “To some extent, the increase in the debt ceiling from 60% to 65% of gross domestic product should give the government more leeway in the future in that respect,’’ said OCBC Bank (M) Bhd economist Wellian Wiranto.

       Raising the debt limit gives the government some ‘wiggle room’ to support the people and businesses in current challenging times.

       With schemes like i-Lestari, i-Citra and i-Sinar being introduced, the EPF has lost its financial safety net feature, which is “forced” savings.

       Coupled with the lack of financial literacy, these schemes if used improperly, can cause people to be exposed to early debt when EPF is supposed to be their retirement savings.

       Trying to start a family or getting married using these withdrawal schemes may be a priority but new measures and restrictions must be introduced to ensure that the social safety net feature of these programmes is still relevant, said Yellowshorts Consulting Sdn Bhd director Nicholas Chan.

       Younger Malaysians are the most impacted as expenses are high while income especially among fresh graduates are still low.

       They also typically have less savings and back-up funds to fall back on during these Covid-19 pandemic times.

       They are also keen to buy their first home.

       To rebuild the culture of savings among the young, the EPF can tap on innovative and data-driven methods such as gamification and badge-based rewards for meeting goals, said Ernst & Young Consulting Sdn Bhd partner Ling Kay Yeow.

       Gamification is, in simple terms, the process of adding games or game-like elements to a task so as to encourage participation.

       Meanwhile, data-driven methods are targeted and accurate messaging and techniques to encourage the young to save.

       A pre-determined amount set by age in EPF Account 1 is for members to have minimum savings of RM240,000 by the age of 55.

       Malaysians can opt to make voluntary contributions into EPF savings of up to RM60,000 a year. Whether you are an employee or self-employed, you have the option to contribute to EPF i-Saraan, which has the added benefit of a 15% government contribution capped at RM250 per year, on top of your own contributions.

       Other retirement savings beyond EPF should be considered; a good target is to save and invest at least 20% of your income beyond EPF contributions, said Wealth Vantage Advisory, chief knowledge officer, Stephen Yong.

       Younger Malaysians who have lesser financial commitments, may consider saving and investing 40% and above of their income to help them reach financial independence earlier.

       This is a problem that cannot be ignored and proactive steps must be taken all round to ensure that we do not actually develop a severe retirement crisis.

       Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.