KUALA LUMPUR: The Employees’ Provident Fund (EPF) recently announced a long-awaited restructuring of contributors’ accounts (Employees Provident Fund Account 3) that would allow individuals to withdraw part of their retirement fund at any time. It is a major reform aimed at changing a decades-old system established to help private sector workers build retirement savings, it said.
The EPF’s chief executive Ahmad Zulqarnain Onn says the new scheme is aimed to “empower” contributors by giving them flexibility in managing their retirement savings. Here is all you need to know about the Employees Provident Fund Account 3:
What Is Employees Provident Fund Account 3?
Starting May 11, the new system allowed all contributors to have their savings distributed into three accounts.
The percentage of contribution made to the first account, which will be renamed “Persaraan”, is now 75%, 5% higher than the replaced system. 15% of the savings will then be credited to the “Sejahtera” account.
The remaining portion will go into the third and new account, dubbed “Fleksibel”. This account will be the portion of savings that contributors can withdraw from.
How Does Employees Provident Fund Account 3 Work?
All contributors can withdraw funds from the Fleksibel account, which starts with a zero balance. However, they have a one-time option to “front-load” part of their savings from account 2 to the third account.
With this option, one-third of the 30% savings you currently have in Account 2 will be credited to the Fleksibel account, while one-sixth will go to the Persaraan account.
When Can Contributors Withdraw? Are There Any Conditions?
Once a contributor decides to front-load, the money will be credited into the third account, with the option to withdraw after May 13. Front-load applications can be made through the EPF smartphone app or at other EPF branches.
There are no conditions for withdrawal with the lowest amount allowed being RM50 which can be withdrawn anytime. Each contributor aged 55 or below has until August 31 to decide whether or not to front-load.
Will The Withdrawal Affect The Dividend Rate?
Any withdrawals will affect the dividend rate in the same way as the previous system. The more a contributor withdraws, the lower the rate will be.
On the contrary, this means that a contributor’s dividend rate will not be affected if he or she leaves the Fleksibel account untouched, even after having chosen to front-load.