I-Sinar - Friend Or Foe??

I-Sinar is an immediate respite at the expense of future financial stability. There is no doubt that giving people the opportunity to dip into their retirement funds has some economic plus points. It is meant to boost consumer spending, which is a first step towards economic recovery.

On the other hand, the average Malaysian has very low financial literacy, running the risk of him making poor decisions that lead to disastrous situations.

i-Sinar - is a scheme that enables contributors to withdraw up to RM10,000 from Account 1 of their EPF savings. EPF contributors can now check for updates on their i-Sinar applications on its website. 

Under normal circumstances, the Account 1 is a “no-go” zone. The contributor is not allowed to touch a sen of the money until he clocks out for the last time. The i-Sinar programme is therefore a violation of that principle.

The rationale is that with that additional cash in hand, it can help a family tide over a lean period caused by pay cuts or job losses. This could benefit the almost 90,000 people who have already lost their jobs as a result of the economic fallout caused by the Covid-19 pandemic.

However, a majority of Malaysians find it difficult to grasp the principles of financial planning. A survey conducted in October last year showed that 70% of the 3,333 respondents are in need of financial literacy support.

The overall picture is ugly. Data from the Insolvency Department shows that 84,805 Malaysians were declared bankruptcy from 2015 to 2019, and 26% are aged 34 and below.

High Debts Ratio - In 2018, Bank Negara Malaysia revealed that 47% of Malaysian youth have high credit card debts. The average EPF contributor spends his entire savings within three years after retirement. Many individuals struggle with money management because they lack the know-how to manage their finances. This is compounded by the fact that they are more vulnerable to scams. Given that more individuals are out of a job, criminal activities such as financial scams have become more rampant.”

The less financially-literate have found it difficult to identify financial products and services that are appropriate for their needs, leading them to make poor monetary decisions.

Nonetheless, the i-Sinar programme is not all bad. Those who do not actually need the money to meet immediate financial obligations can invest the cash in private retirement schemes.

Tax Relief - An investor can benefit from the long-term tax exemption of up to RM3,000 until 2025, enabling him to not only boost his retirement fund but also benefit from the yearly tax deduction.

An investor can benefit from the long-term tax exemption of up to RM3,000 until 2025, enabling him to not only boost his retirement fund but also benefit from the yearly tax deduction.

All said, whether the i-Sinar will have the desired effect or bring financial ruin will be known soon enough.