Translated by DOMINIC LOH
Sin Chew Daily
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| Currently the EPF dividend yield is still more than one percentage point higher than housing loan interest rate. Photo courtesy: File image |
PETALING JAYA, Jan 6 (Sin Chew Daily) -- EPF allows depositors to withdraw their EPF savings to pay for two bank loans, which should be great news for many house buyers. However, the dividend yield of EPF is still higher than housing loan interest rate by more than one percentage point, and as such house buyers should evaluate whether it is feasible to take out their old-age savings.
When contacted by Sin Chew Daily, local economic analyst Peck Boon Soon said buying properties could be seen as a form of saving, as many people feel that they should take out their EPF savings to service their bank loans instead of leaving it with EPF.
Nevertheless, he said this would be more feasible for new purchasers and not for people already owning properties.
High dividend yield
"Currently EPF's dividend yield is still more than one percentage point higher than housing loan interest rate. As such, many people will still keep their money with EPF instead of withdrawing it to pay for loans.
"The EPF dividend yield may not be higher than housing loan interest rate in the future. If it is lower, than you should take out your EPF savings to pay for your housing loans."
According to EPF's website, members aged below 55 years can apply online to pay for at least RM100 in housing loans a month for at least six months, provided they have not less than RM600 in their Account 2.
Deputy finance minister Datuk Ahmad Maslan pointed out earlier in the Parliament that based on the average life expectancy of 75 for Malaysians, a retired employee will need at least RM196,800 of savings in his or her EPF accounts to lead a simple retirement life for 20 years. He reminded the public that this amount would only be sufficient to provide RM820 a month for the simplest expenses barely above the poverty line.
Not something new
EPF's public relations department pointed out that members could withdraw their savings from Account 2 to pay for monthly housing loans, and that the measure had been in implementation for quite some time and was by no means something new.
The department told Sin Chew Daily one of the objectives of EPF was to provide efficient services for its members and had consequently streamlined the application procedures further so that members could now apply online to withdraw their EPF savings to pay for housing loans.
When asked whether such a measure would affect the total savings of depositors, the PR department said accommodation, medical care and education were fundamental needs for a retiree; however this measure only served to provide an additional choice for members.
EPF announced that it was considering extending employees' contributions until the retirement age of 60, but to date it is still maintained at age 55. EPF's website also says members can withdraw all their savings one-off after age 55.
Unwise move
National House Buyers Association honorary secretary-general Chang Kim Loong described EPF's policy of allowing depositors to withdraw their savings to pay for housing loans as a "badly conceived short-sighted idea" because these EPF members might not have sufficient disposable income and should therefore not force themselves to purchase houses and service the loans.
He told Sin Chew Daily EPF savings were meant for retirement expenses, taking out EPF savings to pay for housing loans could result in the depositors not having sufficient retirement fund in the future.
"Moreover, this means the borrowers do not have enough disposable income for their monthly loan instalments and minimal living expenses. Those who really have the financial ability do not pay for their housing loans with EPF."
He said house purchasers should instead work harder to earn more money instead of taking out from their retirement funds.
He analyzed that this measure would only entice the developers and banks to conspire to lift house buyers and release large amounts of loans to encourage speculative buying.
He said EPF also provided another facility whereby members can withdraw once a year from their Account 2 to reduce their loan balances.
"This one is probably better for house buyers because by reducing the loan balances they can shorten their loan periods and have their loan interests reduced."
He nevertheless slammed EPF for confining the services to specific banks only, namely RHB and Maybank, which is not fair.
"EPF's scheme must benefit all the members and not selectively for borrowers from particular banks."
He also felt that EPF should not continuously encourage its members to withdraw their "future money" but should instead invest wisely to provide its members higher dividend yields.
Source: http://www.mysinchew.com/node/104856?tid=4
SinChew - Malaysia
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