1) You’re not alone in contributing to the EPF account.
Take a closer look at the details on your pay slip and you might notice something along the lines of “Employer EPF” (refer to sample payslip below). That’s right, most companies are bound by law to contribute to your EPF account as well, so that’s a plus.
The rate for employers is capped at an additional 13% of your gross salary (if you are earning below RM5,000) or 12% (if your salary is above RM5,000). The next time you feel like you’re losing a portion of your hard-earned money to the EPF, you’re actually saving that 11% (or 8%) and getting an additional 13% (or 12%) on top of it!
2) You can opt to increase the amount of contributions you’re making.
Even though the Government recently amended the statutory minimum rate to 8% (it was previously at 11%), you can actually choose to contribute at a rate exceeding that of the mandatory percentage.
In short, if you suddenly decided to contribute 80% of your salary to the EPF each month, nothing and nobody is going to stop you from doing so! However, bear in mind two things before you make such a drastic decision: your monthly expenses and the risk of placing all your eggs in one basket.
If you don’t have other sources of income such as freelancing, then 80% of your fixed salary contributed towards your EPF might put too big of a dent in your cash on hand. In addition, investing the bulk of your salary in just one equity can be quite risky since a diversified portfolio is able to provide you with the best chance of lowering your risk for loss and increasing your returns.
3) You can withdraw the full sum of money in your EPF account.
As long as you are retired at 55 years of age, you’ll be able to do so easily enough. However, there isn’t just that one method for you to take out your savings. Did you know that there are as many as 17 types of withdrawals which you can select from? You can extract a portion of your money for use on various intentions such as education fees, medical bills coverage or to perform the Hajj, although some parties are not in favour of you doing so.
According to the executive director of the Malaysian Employers Federation (MEF), Datuk Shamsuddin Bardan, “It should be noted that EPF savings are meant for retirement use, not for investment purposes. The principle of saving money in EPF is to ensure that there is enough when members retire, and they should look at other avenues for education or housing, like the National Higher Education Fund Corporation.”
4) You have the option of withdrawing from your 'Akaun Emas'.
If you continue working past the age of 55 but have not heard of this initiative, where have you been? We’re only joking; it’s actually an enhancement to the current EPF schemes as a method to address the issue of insufficient savings after retirement. All new contributions received after 55 years of age will automatically be parked under this second retirement fund.
EPF chief executive officer Datuk Shahril Ridza Ridzuan was quoted as saying that “the funds can only be withdrawn when members reach age 60, to ensure that they have sufficient retirement savings upon reaching that age. Upon 60 years of age, a member’s savings in both the accounts will be consolidated for withdrawal purposes.”
After which, a full withdrawal is allowed at the member’s discretion. Interestingly, the dividend payment limit has been raised from 75 to 100 years of age to allow for members to continue contributing and keeping their savings with the EPF, thereby benefitting from the compounding effect of the remaining funds left in their account.
5) You won’t just be enjoying the dividends from your EPF account.
This savings vehicle has additional types of benefits which should serve to further convince you that having your money automatically deducted each month is not such a bad idea after all:
a. Dividend: A Government-guaranteed minimum rate of 2.5% will be paid out to each and every contribution to the EPF. Even though that rate sounds low, bear in mind that for the last decade or so, the rate has been at a healthy average of 5-6% per annum. The dividend will be calculated based on the aggregate daily balance.
b. Incapacitation and death benefits: When a member is declared unfit to work or passes away, their member/guardian or beneficiary will receive a one-time payment as a form of goodwill gesture by the EPF. This sum of money does not come from the member’s account; it is in fact from the EPF’s investment earnings and aims to lessen the financial burden.
The incapacitation benefit is RM5,000 while the death benefit is RM2,500. Both are subject to the EPF’s conditions first, such as the date of application and the member’s age.
c. Tax exemption: Finally, did you also know that your contributions to the EPF are tax deductible, up to a maximum of RM6,000 per year? This also includes the exemption for life insurance premium. Best of all, the dividend you earn and the money withdrawn under the EPF savings withdrawal schemes are all tax exempted!