EPF basic savings revised

KUALA LUMPUR: The Employees Provident Fund (EPF) has revised the basic savings that should be achieved by Malaysians to a minimum of RM196,800 by the time they are 55, a move towards avoiding old age poverty for the country which will be an aged nation by 2030.

“The new basic savings rate, which will take effect from Jan 1, 2014, has been benchmarked against the minimum pension for public sector employees which is currently at RM820 per month,” EPF deputy CEO operations Datuk Ibrahim Taib said yesterday.

Meanwhile, with the retirement age revised to 60, more than six million EPF active members will benefit through higher savings.

From August 2013, employees up to age 60 receive EPF contribution of 13 percent for those earning up to RM5,000 per month while those earning above RM5,000 receive 12 percent. Employees contribute 11 percent.

Prior, employers and employees were required to only contribute half of the staturory rate for those above age 55.

The move is to adequately prepare the workforce for retirement as the country is morphing into an aged nation. It is projected that 15 percent of Malaysia’s population will comprise the elderly by 2030.

Some 71.51 percent of EPF contributors aged 54 have savings less than RM50,000 while 91 percent of the EPF members are earning less than RM5,000 a month as of last year.

In a bid to redress the problem, the government has stepped up its effort in encouraging working Malaysians to boost their EPF savings through higher contribution or opt for other forms of saving such as the Private Retirement Scheme.

Currently, members are allowed to withdraw all of their Account 2 savings upon reaching age 55 and all of their savings at age 55.

However, Ibrahim said EPF members are encouraged not to withdraw all of their retirement savings at age 55 but to stretch their savings for a longer period through the age 55 flexible withdrawal.

By Tanu Pandey