MALAYSIA, 17/04/2024 (Asia News Channels) - The Employees Provident Fund (EPF), also known as KWSP, is set to introduce a new savings facility called Account 3, also referred to as the "Flexible Account". This addition aims to aid members during emergencies by allowing them to withdraw 10% of their monthly contributions at any time.
The New Straits Times has reported that this new account will start with a zero balance, with only contributions from May onwards being eligible. The decision to establish Account 3 follows significant withdrawals made during the COVID-19 pandemic, which saw RM145 billion withdrawn from the fund.
Under the new system, monthly contributions will be allocated across three accounts: 75% to Account 1, reserved for retirement; 15% to Account 2, used for education, healthcare, housing, and partial withdrawals at age 50; and the new 10% to Account 3, which will function similarly to a savings account with flexible withdrawal options. Members will also have the option to transfer funds from Account 3 to Accounts 1 and 2 to maximize potential capital gains.
While EPF plans to provide further details on how contributions will be distributed and the withdrawal processes for Account 3, experts speculate that the ease of withdrawal might lead to lower returns due to shorter holding periods in comparison to the other accounts. Additionally, members who choose not to withdraw from Account 3 could face a lower dividend payout, which may be referred to as a "token" payout relative to the other accounts.
The methodology for calculating annual dividends is yet to be detailed. Recently, the EPF declared a dividend rate of 5.5% for conventional accounts and 5.4% for Syariah accounts for 2023, with RM57.81 billion paid out to its 8.5 million active members last year.
-- ASIANEWCHANNELS