MALAYSIANS could run out of savings by the age of 58 due to low wages, high debt and premature withdrawals from their retirement funds during the pandemic, according to Bank Negara Malaysia (BNM). And the situation risks worsening.

About RM145 billion (S$43.8 billion) was pulled from the Employees Provident Fund (EPF) accounts during the Covid-19 outbreak, an unprecedented move made possible by the government of the day. The special withdrawals caused the pension fund’s assets under management to drop for the first time ever last year, while BNM said it exacerbated an “already acute” risk of inadequate pensions in the South-east Asian country.

Prime Minister Anwar Ibrahim is under pressure to let citizens dip into their retirement savings once again, with the opposition clamouring that he allow for another round of “targeted withdrawals” to help struggling Malaysians.

“Malaysians want aid now, not 15 years in the future,” former Prime Minister Ismail Sabri Yaakob said in Parliament last month, as his colleagues thumped their desks in support. “Their homes are being auctioned now, their kids want to enter university now, they face bankruptcy now.”

Anwar has resisted the calls, prompting the opposition on Monday (Apr 3) to walk out of Parliament in protest. That same day, a cab driver reportedly completed a 312-kilometre walk to the national palace in Kuala Lumpur to petition for the early EPF withdrawals, local media reported. His journey went viral on TikTok, and the political heat is set to rise further for Anwar with six state elections a few months away.

The central bank has sounded alarm bells. To be sure, the situation for retirees was already looking dire pre-pandemic due to structural issues such as low wages — the median savings for the cohort in the 51-55 age group would have only lasted five years upon withdrawal at 55, the bank said in a report published Mar 29. After the Covid-era withdrawals, that’s dropped to around three years, it said.

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With global life expectancies seen rising to above 77 by 2050, “an average Malaysian would be at risk of having depleted his or her retirement savings 19 years before death”, said BNM.

Millennials may be the hardest hit. Between 2020 and 2022, the share of members in the 26-40 age group that met the EPF’s Basic Savings threshold fell the most. This cohort may have foregone savings of up to 94,000 ringgit when they retire at 60, according to the report.

This highlights the urgent need to rebuild savings buffers, it said, calling for policies that extend the accumulation phase as a way to bolster retirement savings. This may involve reinvesting a portion of savings that would otherwise have been withdrawn at retirement age, the bank said.

The opposition has painted a more immediate picture of Malaysians’ plight.

“If the government won’t allow targeted withdrawals, what further proposals does it have to help the people who are struggling and anxious? People are selling their kidneys!” lawmaker Wan Ahmad Fayhsal Wan Ahmad Kamal said on Monday, without providing evidence. Selling organs in Malaysia is illegal.

Anwar has made concessions while working within the government’s limited fiscal space. His spending plan for 2023 includes a 500 ringgit contribution to EPF members with less than 10,000 ringgit in their accounts. When the pressure didn’t let up, he proposed that Malaysians be allowed to use their EPF savings as “support” to apply for loans at below-market interest rates.

“But some opposition said the prime minister is stupid for letting poor people take loans,” Anwar said in a forum on Mar 19. BLOOMBERG