BusinessTimes
CHANGES will be made to the Employees Provident Fund scheme structure to enable its 11.4 million members to have a healthier level of savings upon retirement.
These changes, to be implemented in phases between November this year and January 2013, will also give members greater choices and flexibility to manage their EPF savings.
EPF chief executive officer Datuk Azlan Zainol said key among the changes is the introduction of basic savings, with members required to set aside a certain amount in their Account 1 progressively at various age levels.
This would ensure that members would have accumulated at least RM120,000 when they turn 55 to cover their basic retirement needs.
That sum would enable a retiree to live on RM500 a month over a 20-year period until he or she is 75 years old, which is the average life expectancy of Malaysians.
Azlan said changes such as these were necessary as the average retirement savings for EPF members currently is inadequate.
“With Malaysians having a longer lifespan aswell as inflation, escalating medical costs and a weakening extended family system, many members may find themselves with insufficient funds if the issue of adequacy of savings is not addressed now,” he said at a briefing yesterday.
Last year, the average savings of an active member at age 54 was only RM114,402, and for an inactive member it was RM21,478.
Azlan noted that a survey done three years ago showed that 98 per cent of EPF members tend to withdraw all their money when they turn 55.
And of these, it was found that 80 per cent would exhaust those savings in three years.
To discourage lump-sum withdrawals, the EPF will soon give members over the age of 55 the option of making ad-hoc withdrawals.
As ofNovember, they can withdraw a minimum of RM2,000 at any time, at intervals of at least 30 days.
“We may make it even more flexible in future and allow withdrawals of RM1,000 a day, for example,” Azlan said.
It will also soon be mandatory for employees aged 55 years and above to contribute to the EPF.
However, the statutory contribution rate will be halved to promote employability of this group.
From November, EPF plans to allow members of any age whose total savings have exceeded RM1 million to withdraw an amount in excess of RM1 million at any time to invest on their own.
According to Azlan, there are about 4,700 members with savings of more than RM1 million.
Another major change that will be enforced — although only in January 2013 —is that members must have RM120,000 in Account 1 at age 55 to be able to withdraw their savings in Account 2.
This rule will affect members who are currently 45 years old, Azlan noted.
Among other changes that will be implemented are:
• allowing members to use savings in excess of the “basic sum”in Account 1 for approved investment products (next February)
• allowing members to withdraw savings from Account 2 to purchase critical illness insurance policy for themselves and immediate members (next June)
• allowing children to top up parents’ savings in Account 1.
Spouses too can do this for each other (next June)
• making it mandatory for big companies (more than 1,000 staff) to contribute via electronic mode. (next June)
Azlan said the changes come under the EPF’s Beyond Savings initiative.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
