‘Government in talks with EPF on higher housing withdrawal’ reads the headline of an article in The Star Online on Oct 5, 2016.

An excerpt from the article says, “The government is discussing with the Employees Provident Fund (EPF) to provide flexibility to first-time home buyers in withdrawing more from their account to aid their affordable home financial needs. And if the house is sold at a later stage, the proceeds must be returned to EPF based on the extra quantum they had withdrawn, so that the system will not be abused,” Second Finance Minister Johari Abdul Ghani said.

The report said by increasing the funds in account two from the current 30 percent to 40 percent of EPF balances, contributors can have more funds in account two to pay the downpayment of their property.

My two cents worth; to most of us, EPF is our pillar of strength in our golden age. We should and must be having a private retirement saving scheme to support the increasing expenses but we lack discipline and are still very ignorant about the consequences of ageing with shrinking funds. Thus, although insufficient in amount, the EPF savings is still the best fallback plan to many of us, especially the middle-class income-earners.

A recent survey conducted by HSBC Bank Malaysia Bhd has found that retirees feel a minimum of RM5,000 a month is needed for comfortable retirement. The big problem - close to a third (31 percent) of Malaysians now live on just RM3,000 a month. And the benefits in Malaysia only amount to one-third of final salary (34 percent) when employees are first able to withdraw their pension pots at age 55.

To add to it, workers can withdraw their pension pot early, causing them to outlive their assets in later years.

Thus, instead of even considering withdrawing from our second account in EPF to purchase a house, why not utilise the existence of MyDeposit?

The MyDeposit scheme was first announced in Budget 2016 last October. About RM200 million has been allocated for the MyDeposit scheme. This scheme essentially helps first-time home buyers cover the 10 percent of downpayment, or a maximum of RM30,000, whichever is lower. This scheme is limited to eligible home buyers looking to purchase residential properties priced at RM500,000 and below. It is a grant and not a loan.

To learn more about this scheme, please visit here.

No doubt that it is offered with quite a number of terms and conditions but is still a better choice compared to withdrawing from your EPF savings.

My concern is many of us are still not aware of this MyDeposit scheme. It is worrying to imagine youngsters committing to an uninformed decision in unlocking the door to home ownership by exhausting their retirement savings.

In the EPF 2014 annual report, it was revealed that by age 54, 68 percent of its members had accumulated savings of only RM50,000 and below, due to the many qualified withdrawals they had made beforehand.

According to recent figures from the EPF, its active 54-year-old contributors have an average savings of just under RM167,000 last year. The recommended minimum savings level is RM196,800.

At such, I believe it is not at all healthy for middle-class income-earners to practice forking out of EPF savings for any other reasons before they are 60 years old.

Affordability issues a major hurdle

Talking about house ownership, affordability issues are real and are a major hurdle. Houses are priced very high and are no match with average household income in Malaysia. Even in developed countries like Singapore, the government is aiding its citizens in home purchasing and it’s not limited to first-time home buyers only.

In countries like Australia, first-time home buyer grants have been implemented since year 2000. It is provided mainly to offset the effect of the Goods and Services Tax (GST) and stamp duty concession on home ownership. In Texas, grants are given as downpayment assistance and in many other states in the US, even home repair and maintenance grants are provided to senior citizens and single parents.

Home ownerships are given so much of priorities by countries all over the globe because it is one of the very basic needs of an individual/family - shelter. Malaysians should not be forced to fork out their retirement savings to meet this basic need.

Instead of negotiating with EPF, probably the government should look at increasing MyDeposit to 20 percent and lower the gross household income to RM2,000.00 instead of RM3,000.00. Increase the allocation to RM400 million per batch in the upcoming Budget 2017 to produce better success rates.

Financial literacy/planning and risk management are areas/topics that all of us should focus and educate ourselves on before committing to any purchases/investments. We appreciate all initiatives taken by our government to assist first-time home buyers. However, our concern is, the options derived from these initiatives should not burden the rakyat in their later years.

S GOPINATH is president of the Malaysian Indian Network of Entrepreneurs Association (1MINE).