The Employees Provident Fund (EPF) in Malaysia is set to announce the introduction of a new Account 3, called the 'Akaun Fleksibel' or Flexible Account, on April 26, 2024. This addition to the existing Account 1 (retirement savings) and Account 2 (education, health, and housing) will allow EPF members to make partial withdrawals of their savings for emergency or necessary expenses.
Under the restructured system, monthly contributions will be split into 75% for Account 1, 15% for Account 2, and 10% for the new Account 3. Members will have the option to transfer funds from Account 2 to Account 3 through an opt-in mechanism between May 11 and August 31, 2024. After this period, members can withdraw a minimum of RM50 from Account 3 at any time for any purpose.
EPF CEO Ahmad Zulqarnain Onn stated, "This initiative aims to empower members in managing their short-, medium-, and long-term financial needs, as well as to help increase their retirement savings and ensure sufficient retirement income." The introduction of Account 3 comes after the EPF saw RM145 billion withdrawn during the COVID-19 pandemic.
Why this matters: The new Flexible Account provides EPF members with greater control over their savings, allowing them to address emergency financial needs without compromising their long-term retirement goals. This move also reflects the EPF's efforts to adapt to the changing job landscape and economic challenges faced by Malaysians.
As of December 2023, the EPF's investment assets stood at RM1.13 trillion, and the fund paid out RM57.8 billion in dividends to members for 2023. The introduction of Account 3 is expected to have a muted impact on the EPF's portfolio, with estimated yearly withdrawals of RM4-5 billion. While dividends will initially remain the same across all three accounts, this could change in the future as liquid assets may not attract higher interest rates or dividends.
Economist Dr. Muhammed Abdul Khalid noted that while the Flexible Account may not be the best policy, it is the only alternative when other aids are insufficient. He emphasized the need for the government to increase the coverage and adequacy of cash assistance programs to address the effects of an aging population and the high cost of living faced by Malaysians.
Key Takeaways
- EPF to introduce new 'Flexible Account' (Account 3) on April 26, 2024.
- Monthly contributions to be split: 75% Account 1, 15% Account 2, 10% Account 3.
- Members can withdraw min. RM50 from Account 3 anytime for any purpose.
- EPF aims to empower members in managing short-, medium-, and long-term needs.
- Estimated yearly withdrawals from Account 3 to be RM4-5 billion.