The primary objective of the EPF Account Restructuring is to ensure sustainable financial well-being during retirement while balancing current member needs. This initiative aims to enhance members’ savings so they have sufficient retirement income to sustain their future lives.
Members have the option to choose whether to have an Initial Amount in Account 3 by transferring a portion of their savings from Account 2 (formerly Account 2) to Flexible Account (Account 3) starting from May 12, 2024, until August 31, 2024. Please note, the transfer is from Account 2 to Account 1 and Flexible Account (Account 3) only. The Initial Amount option does not involve any transfer of savings from Account 1 to Flexible Account (Account 3).
Minister of Finance II Datuk Seri Amir Hamzah Azizan, at the Dewan Negara today, said as of July 19, 2024, a total of 3.8 million or 29.3% of the 13.1 million EPF members under 55 years old have opted to have an Initial Amount in Flexible Account, with a total transfer amount of RM12.6 billion, while RM5.6 billion has been transferred to Account 1.
“This transfer to Account 1 has resulted in increased member savings, with an additional 43,000 new members achieving basic savings.
“A total of 3.4 million members or 26.2% of the 13.1 million EPF members under 55 years old have made withdrawals from Flexible Account amounting to RM8.9 billion.”
Amir Hamzah added the withdrawals from Flexible Account have not significantly impacted EPF due to the expected amount of withdrawals by members falling within EPF’s cash and market allocation under the Strategic Asset Allocation (SAA), which allocates between 2% to 6% of EPF’s investment assets to cash and money market instruments.
“Furthermore, the investment allocation strategy under SAA will be periodically reviewed to consider asset forecasts, liabilities, EPF’s liquidity position, and the impact of EPF Account restructuring. EPF remains committed to safeguarding and enhancing member savings by optimizing its investment portfolio and providing sustainable dividends or returns in line with EPF’s long-term retirement fund objectives.
“In terms of economic implications for the country, the initial expectation of Flexible Account withdrawals in the first year is approximately RM15 billion, approximately 0.8% of Malaysia’s nominal Gross Domestic Product (GDP) for 2023.
“However, the actual impact of the introduction of Flexible Account on the country’s GDP growth will depend on several factors, including members’ spending patterns,” Amir Hamzah said in the Dewan Negara today, in reply to questions raised by Sen Anna Bell @ Suzieana Perian who requested the Minister of Finance to disclose the percentage of contributors who have opted to transfer contributions into Account 3 and made withdrawals to date, as well as the significant economic implications for EPF (Employees Provident Fund) and the country following the announcement of EPF Account 3 in May 2024.
To a following question raised by Anna Bell on to what extent the implementation mechanism of the flexible account for emergency withdrawals from EPF can effectively assist contributors and provide benefits to those in need, Amir Hamzah said, the EPF scheme is continually improved to ensure members have sufficient retirement income security to sustain their lives throughout retirement.
The government recognises that EPF savings are intended for members’ retirement purposes in the future, but understands the need to consider situations where members may urgently require their savings.
“Therefore, the restructuring of the EPF Account is aimed at enhancing retirement income security while meeting members’ life cycle needs, allowing members to access Flexible Account (Account 3) at any time and for any purpose, particularly for emergencies. It enables members to obtain immediate cash financial resources. However, EPF members are advised to use these withdrawals for emergency purposes and urgent needs only,” he added.
He told members of the Upper House today that the proportion for Account 1 has been increased by 5% from 70% to 75%. This is seen as capable of increasing members’ savings rates and accelerating members’ basic savings rates for retirement purposes.
This initiative is not just a government response to current needs, but a proactive step to help the people cope with changes in the job landscape and demographic shifts as well as the life cycle needs of EPF members.
“With this initiative, the government strives to ensure that every EPF member can manage their finances confidently and resiliently in this dynamic and challenging environment, while meeting short-term financial needs that could affect their retirement well-being if not met.”
