KUALA LUMPUR, March 19 — The Employees Provident Fund (EPF) said today it anticipated further reductions in contributions as more workers go into the informal sector.
EPF’s new chief executive Tunku Alizakri Alias told international investors here that the total number of workers who contributed to EPF had dropped drastically to just 40 per cent from 48 per cent from a few years ago.
And with a large number of the country’s 15 million-over workforce expected to reach retirement age soon, the fund could face more cash problems if contributors make huge withdrawals.
“There might be a day that EPF may not even exist anymore,” Tunku Alizakri told Invest Malaysia 2019, a conference on capital markets here.
The pension fund’s immediate challenge is to convince contributors to keep their money with EPF, the CEO added.
“I told my team we need to have more products and services... so we (can) convince them to keep their money with us,” he said.
According to government data, over 1.3 million people were employed informally in 2017, with the numbers expected to grow as more jobs become automated and workers are pushed into the “gig economy”.
Gig jobs are technically informal employment, in which people are typically hired and paid on a job-to-job basis.
Although employers in the gig economy, usually tech companies, often tout flexibility as a key appeal, economists have warned about the insecurities that often come with such jobs.
Employees mostly have no benefits that formal employment provides, including healthcare insurance or savings for retirement.
Tunku Alizakri said EPF will soon have to compete with insurance companies, but that is if most of those employed informally opt for or can afford private insurers.
A government study released recently showed a large number of Malaysian workers cannot afford healthcare insurance premiums.
EPF declared a 6.15 per cent dividend for conventional savings with a payout amounting to RM43 billion and 5.9 per cent dividend for Shariah savings with a payout amounting to RM4.32 billion.
In total, the payout for 2018 amounted to RM47.31 billion, a marginal decrease of 1.7 per cent from 2017.