How EPF Account 3 will affect Malaysians
The restructuring applies to all EPF members under the age of 55.
PETALING JAYA: For a majority of Malaysians, their account in the Employees Provident Fund contains the only savings they have for after retirement.
Each pay day, employees will see 11% of their salary credited into their EPF savings, while employers contribute an additional 13%.
Of the total sum, 70% goes into Account 1 and the remaining 30% is deposited into Account 2.
And until one retires, Account 1 is untouchable. Contributors, however, may withdraw from Account 2 to foot medical bills, to fund educational pursuits or to defray the cost of buying a house.
From today, all that will change, for those who are under the age of 55.
A restructuring exercise will see a new account being introduced.
Account 1 is renamed Akaun Persaraan (Retirement) and Account 2 will be Akaun Sejahtera (Wellbeing). The third account is known as Akaun Fleksibel (Flexible).
The introduction of a new account also changes the distribution of funds across the board.
With the activation of the Akaun Fleksibel, the proportion of savings that must be kept in the Akaun Persaraan rises to 75%. The amount distributed to Akaun Sejahtera is reduced to 15%, leaving 10% for Akaun Fleksibel.
Rationale for restructuring
With the restructuring, individuals are able to focus on longer-term planning when their short-term needs are met, according to the pension fund.
EPF believes in the importance of overall financial well-being in retirement planning. The reform to restructure the EPF accounts represents the initial step in addressing these long-term challenges.
At the same time, the introduction of Akaun Fleksibel is to fulfil short-term financial needs of contributors, specifically emergencies.
Hence, the pension fund has advised contributors to not make any withdrawals unless there is an urgent need.
Criteria for transfer
Although Akaun Fleksibel will initially begin with a zero balance on May 11, contributors can choose to transfer a portion of their savings from the Akaun Sejahtera between May 12 and August 31.
However, if you do not opt to transfer any amount, your Akaun Fleksibel will remain at RM0 and will only increase with new contributions after May 11.
The sum that a contributor may transfer from Akaun Sejahtera to Akaun Fleksibel during this period naturally depends on how much one already has in the Akaun Sejahtera.
RM3,000 and above in Akaun Sejahtera
The formula used for transferring funds is based on fractions, specifically using parts out of 30.
For example, assuming one has a total savings of RM100,000, with RM70,000 in Akaun Persaraan and RM30,000 in Akaun Sejahtera.
If contributors decide to opt-in, 10/30 or RM10,000 from Akaun Sejahtera will be moved to Akaun Fleksibel.
Additionally, 5/30 (RM5,000) from Akaun Sejahtera will be transferred to Akaun Persaraan, increasing the balance from RM70,000 to RM75,000.
The remaining 15/30 (RM15,000) will stay in Akaun Sejahtera.
Consequently, after the transfer, the account balances will be RM75,000 in Akaun Persaraan, RM15,000 in Akaun Sejahtera, and RM10,000 in Akaun Fleksibel.
Less than RM3,000 in Akaun Sejahtera
There are two categories for those who have less than RM3,000 in their Akaun Sejahtera.
Those with RM1,000 to RM2,999 in Akaun Sejahtera will be allowed to transfer up to RM1,000 to Akaun Fleksibel. The remaining balance will remain in Akaun Sejahtera.
While those with less than RM1,000 in savings in Akaun Sejahtera may transfer the entire sum to Akaun Fleksibel.
Contributors can apply for the one-off transfer through the KWSP i-Akaun mobile app from May 12 or at the self-service terminals at all EPF branches nationwide.
The transfer can only be completed once. For instance, if a contributor transfers RM800 out of the permitted RM1,000, they will not be allowed to transfer the remaining RM200 at a later time.
How to withdraw
Just as with transfers, members can apply to withdraw their money from Akaun Fleksibel by using the KWSP i-Akaun app or by visiting EPF branches.
The money will be disbursed directly into their bank account upon approval. The process takes only minutes.
Each withdrawal must not be less than RM50.
In short, the contributor does not have to tell EPF the reason for the withdrawal. As such it is likely to be open to abuse.
It is one thing to take out some money to pay for damage to one’s home caused by a fire or floods, but another just to acquire a new smartphone.
For now, EPF can only advise contributors to be prudent and responsible.