The Employees Provident Fund (EPF) plans to introduce Account 3, allowing “unconditional” withdrawals. This account is part of EPF’s reform measures to prevent a future retirement crisis and will offer a lower dividend rate.
Additionally, EPF aims to implement various initiatives, such as a lower contribution rate for informal workers, mandatory monthly withdrawals for individuals born in or after 2010, a voluntary contribution campaign, and expanding EPF’s legal coverage to the entire working-age population.
EPF’s chief strategy officer, Nurhisham Hussein said the introduction of Account 3 could potentially be introduced within the next two years. Although the contribution percentage is yet to be determined, approximately 5% to 10% of monthly contributions may go into Account 3.
However, he noted that this change will not impact the existing 70% contribution to Account 1, but the contribution to Account 2 will be reduced. Besides, members will have the option to transfer their savings from Account 3 to either Account 1 or 2 to avoid the lower dividend rate.
The primary objective of introducing Account 3 is to assist informal sector workers who currently lack sufficient retirement savings coverage. This approach will enable them to save, earn compound dividends, and meet immediate cash needs.
According to EPF’s data, out of Malaysia’s 11.1 million non-formal workers and individuals outside the labour force, only 5% or 591,000 individuals contribute to EPF.
Upon introducing Account 3, EPF also plans to rename all accounts to better reflect their purposes – Retirement Account, Value-Added Account, and Flexible Account. Moreover, EPF may implement a lower contribution rate for informal sector workers to expand coverage among working-age Malaysians. Currently, the employees’ contribution rate stands at 11%.
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