‘EPF funds should only be used for retirement’

KUALA LUMPUR (Oct 20): Prominent financial adviser Yap Ming Hui (pictured) said he opposes the proposal to allow first-time homebuyers to withdraw more funds from their Employees Provident Fund (EPF) savings to finance their purchases as this would encourage bad personal finance management habits.

Earlier this month, Second Finance Minister Datuk Johari Abdul Ghani said the government was studying a proposal to raise the withdrawal limit to 40%, from the current 30%, to ease the burden of first-time homebuyers.

EPF Account 2 currently holds 30% of a member’s monthly contribution and is withdrawable for the down payment or loan settlement of a member’s first home.

“Being a licensed financial adviser, we take a holistic point of view and a long-term perspective. To me, different financial instruments or products have their purposes — and [the] EPF is meant to be for retirement purposes,” Yap, the founder and managing director of Whitman Independent Advisors Sdn Bhd, told The Edge Financial Daily in an interview.

He also disagrees with allowing individuals to use their EPF savings for other purposes like buying computers and paying off medical bills.

He said this will obviously dilute the amount available for retirement — which he said is already insufficient if one depends solely on one’s EPF savings — and makes it easier for people to spend their savings.

“If the government says the EPF is strictly for retirement, then individuals would be forced to plan their finances properly since they don’t have an easy way out,” Yap said.

He said the government should instead lower income tax to ease the people’s burdens, especially since the goods and services tax was implemented in April 2015.

“Income tax — especially for the middle class — should be reduced by 2% to 3%. We didn’t see a lower income tax rate in the previous budget, so hopefully it happens in the next one,” he said.

Yap also hopes the government would do more to improve financial literacy among Malaysians.

He cited the Securities Commission Malaysia’s yearly Invest Smart initiative, which aims to create more informed investors, as an example.

“The government needs to do more of these kinds of educational initiatives, especially since quite a number of people still fall victim to financial scams — like pyramid schemes — with a number of people reportedly losing their retirement savings to these scams,” said Yap.

Another way to improve financial literacy would be for individuals to approach licensed financial advisers like himself, he said, adding that there should be incentives to encourage this, like tax relief.

“When the public engage professionals like us, they pay a fee of, say, about RM2,000. If the government gives some benefits, like a tax relief of RM1,000, this would encourage more people to approach financial advisers for consultation,” he said.

He said a licensed financial adviser would also conduct deeper due diligence when advising clients on whatever financial products they are eyeing.

This article first appeared in The Edge Financial Daily, on Oct 20, 2016. Subscribe to The Edge Financial Daily here.