EPF’s latest addition of Account 3 (Akaun Fleksibel) will provide flexibility for short-term financial needs. Savings in this account can be withdrawn at any time according to members’ needs. — AZHAR MAHFOF/The Star
BIG and complicated issues don’t just appear overnight.
These issues compound a little at a time and snowball into a large mess that would take great effort, time, and resources to resolve.
Thus, immediate solutions are crucial in today’s fast-paced world for addressing short-term issues.
For instance, accumulation of debt until it is too much to handle is likely to cripple a person’s life – causing tremendous financial distress which hampers the ability to enjoy life and affect overall well-being.
This issue can also affect a person’s retirement plan, which in recent years has become a growing concern.
The Employees Provident Fund (EPF) has reported that most Malaysians do not have enough savings for their retirement, with only 33% of active EPF members having recorded basic savings of RM240,000 as of last year.
According to EPF chief executive officer Ahmad Zulqarnain Onn, the 33% represented 2.4 million members aged between 18 and 55 in the formal sector.
This was an improvement from the 31% in 2021 and 30% in 2022 – which were due to withdrawal facilities for EPF members during Covid-19 lockdowns – but still a plunge from 37% in 2020.
He also pointed out that 75% of members who had retired and taken out their savings in a lump sum ran out of money within five years.
Recognising these pressing matters, EPF announced a restructuring of its members’ accounts effective May 11, 2024 that seeks to enhance their income security after retirement, address members’ current life cycle needs, while ensuring there is a solution to their short-term problems.
Ensuring sufficient retirement funds
The account restructuring initiative will see the EPF Account 1 being renamed as Akaun Persaraan, Account 2 as Akaun Sejahtera and the formation of the new Account 3 or the Akaun Fleksibel.
Akaun Persaraan will be for the accumulation of savings that will serve as income during retirement. Akaun Sejahtera will address life cycle needs that contribute to wellbeing during retirement.
The latest addition of Account 3 – Akaun Fleksibel – will provide flexibility for short-term financial needs, whereby savings in this account can be withdrawn at any time according to members’ needs.
According to news reports, industry experts have lauded EPF’s move, saying that it is a “win-win proposition” that would help contributing members resolve short-term problems or emergencies that may arise.
Bank Muamalat Malaysia Berhad Economics and Social Finance head Dr Mohd Afzanizam Abdul Rashid said EPF has mapped out a perfect distribution since Account 1 or the Akaun Persaraan still represents the largest proportion in the account hierarchy of its members.
“This means more than two-thirds of EPF savings in Account 3 will give a lot of space to contributors to use their savings for whatever purpose or emergency,” said Mohd Afzanizam.
Meanwhile, Universiti Kebangsaan Malaysia’s Institute of Malaysia and International Studies research fellow Muhammed Abdul Khalid hailed EPF’s introduction of a third account as a “win-win proposition”, saying it will allow contributors flexibility in accessing their funds and improving their retirement savings.
Noting that the allocation of funds under the new account structure strikes a “reasonable balance”, Muhammed said: “This strategy represents a middle ground, and shouldn’t come as a surprise.
“Once we opened the door for members to tap into their retirement savings as we did in 2020 and 2021, the demand for further withdrawals became almost inevitable.”
Muhammed added that Account 3 was a “less damaging solution” to the needs of members requiring access to cash.
Pointing out that EPF’s Account Restructuring initiative is to empower members in making decisions to balance future needs for retirement between short, medium and long-term financial needs, Ahmad Zulqarnain said:
“This initiative will also help increase members’ retirement savings so that they will have sufficient retirement income to sustain their needs after retirement.”
He added that this initiative is not just EPF’s response to current needs, but also a proactive step to help members facing the changing job landscape.
“With these enhancements, EPF strives to ensure that every member can manage finances with confidence and resilience in this dynamic and challenging environment,” said Ahmad Zulqarnain.
However, members are advised to exercise self-control when making withdrawals.
Is it mandatory?
EPF’s account restructuring announcement was met with mixed reactions.
At the time of writing, an on-going poll titled “Will you opt in to transfer funds to your EPF Account 3?” by Star Media Group saw a total of 6,677 votes cast with 44.03% (2,951 votes) of yes, 44.47% (2,981 votes) of no, 10.47% (702 votes) being undecided, and 1.03% (69 votes) of ‘other’ reasons.
And to answer the question, no, it is not mandatory for EPF members to utilise Account 3.
EPF is giving members a one-time only option to transfer part of the savings balance in their Akaun Sejahtera (previously Account 2) as an initial amount to the new Akaun Fleksibel.
This offer is only valid from May 11, 2024 till August 31, 2024. It is important to note that the opt-in cannot be cancelled.
Mechanics wise, the introduction of Account 3 for anytime withdrawals means EPF members can choose to take out up to a third of the balance in their existing Akaun Sejahtera (Account 2).
On May 11, 2024, all EPF members (including contributing members who are non-Malaysians) under the age of 55 will have their accounts restructured into Akaun Persaraan (Account 1), Akaun Sejahtera (Account 2), and Akaun Fleksibel (Account 3).
Balances in Account 1 and Account 2 will remain in the Akaun Persaraan and Akaun Sejahtera respectively, while Akaun Fleksibel will start with a zero balance.
All contributions after this date will be allocated into the new accounts based on the following breakdown:
- 75% into Akaun Persaraan
- 15% into Akaun Sejahtera
- 10% into Akaun Fleksibel
Between May 11, 2024 and August 31, 2024, members will have a one-time only option to transfer part of the savings balance in their Akaun Sejahtera (previously Account 2) as an initial amount to Akaun Fleksibel.
If the member chooses not to opt-in for an initial amount, no transfer will be made and the existing balance will remain in the Akaun Sejahtera.
The Akaun Fleksibel will start with new contributions that would be credited into the member’s account after the implementation date.
If the member opts in for an initial amount, the transfer of the initial amount to Akaun Fleksibel and other accounts (if applicable) is based on the balance of the member’s Akaun Sejahtera on the date the opt-in application is made.
The transfer method is according to the following breakdown: >Balance in Akaun Sejahtera of RM3,000 and above:
- Ten out of thirty (10/30) of the balance in the Akaun Sejahtera will be transferred to the Akaun Fleksibel;
- Five out of thirty (5/30) of the balance in the Akaun Sejahtera will be transferred to Akaun Persaraan;
- Fifteen out of thirty (15/30) will be retained in the Akaun Sejahtera. >Balance in the Akaun Sejahtera below RM3,000:
- For Akaun Sejahtera with a balance of RM1,000 and below, all amounts will be transferred to Akaun Fleksibel;
- Akaun Sejahtera with a balance of more than RM1,000 and less than RM3,000, only RM1,000 will be transferred to the Akaun Fleksibel, while the remainder will be retained in the Akaun Sejahtera;
- No distribution will be made to the Akaun Persaraan if the savings balance falls below RM3,000.
Withdrawals made simple
EPF says its members can make withdrawals from the Akaun Fleksibel at any time for any purpose. However, the minimum withdrawal amount stands at RM50.
Applications for withdrawals from the Akaun Fleksibel can be made online through KWSP i-Akaun or at any EPF branches nationwide.
Members who have yet to register with KWSP i-Akaun are encouraged to do so in order for smooth withdrawal transactions to be made.
Meanwhile, there are no changes to current practices for Akaun 55 and Akaun Emas.
All savings accrued in the Akaun Persaraan, Akaun Sejahtera and Akaun Fleksibel by members who have reached age 55 will be merged into Akaun 55, while new contributions received by members from the age of 55 will be credited into their Akaun Emas.
In summary, the account restructuring seeks to:
- Increase savings adequacy to increase retirement income security for members;
- Align short, medium and long-term requirements with members’ life cycle and lifespan;
- Develop EPF schemes that factor in the evolving employment landscape, demographic shifts, and members’ present and future needs;
- Address short-term financial needs that may affect members’ wellbeing during retirement.
Ahmad Zulqarnain noted that the initiative is not just EPF’s response to current needs, but is a proactive step to help members facing the changing job landscape and demographics of the population as well as the life cycle needs of EPF members.
“With these enhancements, the EPF strives to ensure that every EPF member can manage their finances with confidence and resilience in this dynamic and challenging environment.”
He added that EPF has placed enough safeguards in place to ensure members’ long-term wellbeing is not compromised, and is conscientious of the needs of its members.
Download the KWSP i-Akaun mobile app, or visit any EPF branches nationwide for details.
