TheEdge
KUALA LUMPUR: The Employees Provident Fund (EPF) members need no longer have at least RM50,000 in Account 1 to invest 20% of the excess amount through approved investment institutions.
Under its new "Beyond Savings" initiative, effective Feb 1, EPF is allowing its members to make such withdrawals at a lower threshold corresponding to their age, while ensuring they would accumulate at least RM120,000 at age 55.
“That RM50,000 threshold is no longer a criterion. The criterion is now variable at the different ages,” said EPF deputy chief executive officer (operation) Ibrahim Taib at a press conference here on Jan 25.
He said the change would give members the advantage of investing at an earlier age.
For instance, the threshold for a 30 year-old is RM18,000. If the person has RM30,000 in his Account 1, he may now invest 20% of RM12,000 (the excess amount) through approved investment institutions.
But members should make informed decision when investing, cautioned Ibrahim.
“If you can make informed decision, then go ahead and invest. The best investment is still in EPF,” he said, adding that members should not invest if they are not prepared to face possible losses.
Ibrahim said about 1.76 million EPF members would be eligible to participate in the scheme following this change, compared with 850,000 members previously, while monthly withdrawals were expected to double from the current average of RM270 million to RM300 million. EPF had been receiving approximately 20,000 applications each month, he added.
On the RM120,000 projection, Ibrahim said the figure was derived based on the calculation for a person who started work at the age of 18 with a pay of RM440, annual salary increment of 3% and an EPF dividend rate of 4%. This figure would be reviewed on a five-year basis.
Ibrahim also reiterated that the 5.5% contribution for employees and 6% for employers in respect of employees aged 55 to 75 was mandatory.
“Dividends would be paid until the member reaches the age of 75,” he said, adding the change was aimed at encouraging those above 55 years old to continue working.
Members and their employers have the option to contribute more than the prescribed level. This new rate does not apply to members above 55 years old who are currently working and have yet to make any age-55 withdrawal. These workers and employers would continue to make contribution of 23%.
EPF also announced that any savings not withdrawn by the age of 80 would be transferred to the Registrar of Unclaimed Monies.
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