Cover Starting May 11, EPF will restructure its retirement savings accounts into three separate accounts (Photo: Getty Images)
Starting May 11, EPF will restructure its retirement savings accounts into three separate accounts (Photo: Getty Images)
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Here’s what you need to know about EPF’s new Account 3 aka Akaun Fleksibel
The Employees Provident Fund (EPF) announced earlier this week its much-anticipated restructuring of contributors’ accounts that would allow some portion of their retirement fund to be withdrawn anytime.
Starting May 11, the EPF will allocate contributions across three accounts, enhancing the traditional model with a new account aptly named Akaun Fleksibel. This account, constituting 10 per cent of monthly contributions, offers unprecedented access to funds, allowing for withdrawals free from the customary constraints tied to retirement or specific financial needs.
The mainstay retirement savings account, formerly known as Account 1, will be renamed Akaun Persaraan and will now receive 75 per cent of contributions, a 5 per cent increase intended to fortify long-term financial security. The Akaun Sejahtera, previously Account 2, will see its share reduced to 15 per cent, thus focusing its use more on housing, education, and healthcare needs.
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Above Stephen Yong, director and licensed financial planner, Wealth Vantage Advisory
Stephen Yong, director and licensed financial planner, Wealth Vantage Advisory
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Stephen Yong, director and a licensed financial planner from Wealth Vantage Advisory, regards this as a progressive step. “It allows for flexibility for withdrawals while potentially also increasing funds available for retirement,” he explains.
He emphasises a benefit that many might have overlooked, which is that the new configuration has a higher contribution being funnelled into Akaun Persaraan, aimed at enhancing retirement reserves.
“The median amount of EPF savings (as of 2022) is at RM 133,000 vs the minimum RM 240,000 at age 55, which EPF recommends to allow for RM1,000 monthly withdrawal for 20 years. A 5 per cent increase in contributions over 30 years working would increase the median to at least RM 140,000 (and likely more) reducing issues related to retirees having insufficient funds during retirement,” Yong notes.
Above Dr Geoffrey Williams, economist
Dr Geoffrey Williams, economist
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Economist Dr Geoffrey Williams acknowledges the mixed blessings of such flexibility.
“It’s beneficial, particularly for high income earners who will recover quickly due to the larger share going into Akaun Persaraan,” he states.
Yet, he warns that low-income groups might find it challenging to rebuild their savings if they dip too frequently into these funds.
“Those who have already emptied their accounts will not benefit, and millions without EPF will still have no pension. For the scheme to work best, people should probably not allocate too much into Akaun Fleksibel during the opt-in period or withdraw it to start with; otherwise, it will reduce their overall savings from the outset, which will be difficult to rebuild over time,” Williams cautions.
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Above Those with RM3,000 and above can front-load a third of their current savings into the new Account 3 (Photo: EPF)
Above An example of how it works (Photo: EPF)
Those with RM3,000 and above can front-load a third of their current savings into the new Account 3 (Photo: EPF)
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All contributors can withdraw from the Akaun Fleksibel, which will start with a zero balance. However, contributors will be given a one-time option to “front-load” some of their Akaun Sejahtera savings into the third account.
Those with savings in Akaun Sejahtera of RM3,000 and above can front-load a third of their current savings into the Akaun Fleksibel, while a sixth will be credited to the Persaraan account.
Meanwhile, for those with an Akaun Sejahtera balance less than RM3,000, things are slightly different. Those with a balance of RM1,000 and below will see all savings go to Akaun Fleksibel, while those with a balance of more than RM1,000 but still below RM3,000 will see RM1,000 be transferred to Akaun Fleksibel while the rest will remain in Akaun Sejahtera.
Above Those with RM3,000 or less in Account 2 will have a slightly different structure for the opt-in feature (Photo: EPF)
Those with RM3,000 or less in Account 2 will have a slightly different structure for the opt-in feature (Photo: EPF)
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Above Example of those with savings of RM1,000 to RM3,000 in Account 2 (Photo: EPF)
Above Example of those with savings of less than RM1,000 in Account 2 (Photo: EPF)
Example of those with savings of RM1,000 to RM3,000 in Account 2 (Photo: EPF)
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Both experts agree that the potential economic impact of this policy could mirror past emergency withdrawal schemes, with significant sums re-entering the consumer market, possibly stoking inflation but also bolstering economic growth amid low export demand.
Another worry that many EPF contributors have regarding this new structure was how it would impact the future dividends of EPF’s investments. Yong says EPF has assured that Akaun Fleksibel will provide the same returns as the other accounts. “This means that returns in all three accounts will be the same (and also for Akaun Emas for EPF members above the age of 55),” he adds.
However, he does warn that EPF has not ruled out the need that in the future, Akaun Fleksibel’s returns may be lower, which would be typical for investments held in liquid cash and cash equivalents, a sentiment which Williams also agrees with.
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Above Experts believe that prudence is key when it comes to this new structure (Photo: Getty Images)
Experts believe that prudence is key when it comes to this new structure (Photo: Getty Images)
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At the end of the day, both experts feel that prudence is key when it comes to this new structure, emphasising the importance of needs, not wants.
“It is not a good idea to withdraw your retirement savings under any circumstances, but many people will. They should do it for emergencies or investments such as housing, but many will just withdraw it, spend it, or pay off debt and then take on more debt,” Williams warns.
“Only withdraw if you have an emergency or a pressing shortage of funds to cover basic needs such as food and shelter. This opt-in is a double-edged sword with both pros and cons. I suspect many EPF members may opt to move funds to Akaun Fleksibel for increased flexibility while enjoying the same rate of returns. However, this may inadvertently allow for the temptation to withdraw because it’s easily accessible,” says Yong.
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Sim Wie Boon is the general manager of Tatler Malaysia. Previously the print and digital editor, Sim hails from the land of the hornbills, Sarawak. Sim is now based in Kuala Lumpur and brings more than a decade of experience in the media industry as a journalist and broadcast producer.
As a self-proclaimed geriatric millennial, he appreciates the finer things in life, from savouring a sip of single malt whisky to relishing in the deliciousness of char siew. While reminiscing about the indie-sleaze era, Sim now finds solace in the soothing tunes of ambient music, staying active through running and occasionally succumbing to the addictive world of doom scrolling.
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