The introduction of the Employees Provident Fund (EPF) Flexible Account is one of the institution’s alternatives to meet the needs and emergency funds of contributors in facing the challenges of living life before retirement.
Bank Muamalat Malaysia Berhad Chief Economist & Social Finance Head Dr. Mohd Afzanizam Abdul Rashid said, the EPF has planned an accurate distribution means taking into account Account 1 or Retirement Account (AP) which still represents the largest proportion in the account hierarchy of its members.
“This means that more than two-thirds of EPF savings in Account 3 will give contributors plenty of room to use their savings for any purpose or emergency,” he said.
EPF yesterday announced the EPF Account Restructuring initiative effective May 11 by introducing Flexible Accounts for short-term financial needs.
In a statement, EPF informed that the initiative aims to improve the security of retirement income, in addition to meeting the life cycle needs of members when starting that date, all members’ accounts under the age of 55 will be restructured from the previous two accounts namely Account 1 and Account 2 to three accounts.
Mohd Afzanizam advised EPF contributors to conduct careful planning before making a decision to withdraw by taking into account the multiplier factor in their savings.
“This is because when they withdraw the money, members will lose the multiplier factor or compounding factor in their savings at EPF. EPF is seen to always announce competitive dividend rates and this compounding factor will accelerate the growth of contributors’ savings if they continue to save in the institution,” he said.
In addition, Universiti Malaysia Terengganu Faculty of Business, Economics and Social Development Lecturer Associate Prof Dr Roshaiza Taha said that the implementation of Account 3 also benefits the M40 and T20 groups.
“We know some of the incomes of the M40 and T20 groups are higher. For example, he has an income of RM10,000 and he has an EPF contribution of 11 percent, equivalent to RM1,100 and it is possible that he has RM165 (in Account 3). For the B40 group the value will be lower around RM70 or RM30,” he said.
According to him, if those in the B40 group are not financially sound, they are likely to face problems with their retirement fund in the future.
“The government needs to play a role in educating contributors in channelling a small portion of their income to liquid investment because they still need to be protected in the future.
“Looking at the current situation, I know that the ability of Malaysians to continue to survive is so difficult that some people tie their stomachs to eat. However, contributors still need to be aware of their needs and wants,” he said.
