By Jessica Wee

EPF: Employees Provident Fund

KWSP: Kumpulan Wang Simpanan Pekerja

For working individuals in Malaysia, you would be putting aside ~21% (minimum 9% yours and 12% employer contribution) of your salaries towards your EPF savings every month at the start of your careers.

This defined-benefit scheme was created in 1951 by our government to safeguard retirement for those in the private sector. If you are lucky to be in a high earning sector eg: Banks/ tech/ telecom/ medicine/ etc, you would hit RM1mil in EPF savings in your mid 30s.

Data extracted from a private survey revealed that based on 200 voters in the finance industry, 45% of the voters hit RM1mil in EPF savings between the ages of 36-45. This is just a tiny fraction of the 14.6mil EPF members.

The sad truth is that 46% (~6.7mil) EPF members below the age of 55 years old have less than RM10,000 in their account for retirement.

As Malaysia ages by 2035 there will be 15% of the population over 65 years old. Meanwhile, life expectancy has risen to 75 – 82 years old respectively. Moreover, families are shrinking in size and parents can no longer rely on their children to take care of them financially in their golden age. 

EPF has suggested that the minimum savings members should have at age 55 is RM228,000 i.e. living a frugal life of RM950 expenses per month for the next 20 years. For urban folks, this will mean moving out of the city into a cheaper rental place, no eating out and minimum entertainment expenses. 

Further studies by EPF shows that 70% of members who withdraw their funds at age 55, use up their savings in less than 10 years which results in plunging them into poverty in their last years of life.

This happens as financial literacy in Malaysia remains low and there is no budgeting for a retired lifestyle. It doesn’t help when retirees get tricked into parting with their savings through fraudulent schemes and end up losing their life savings. 

To ensure you can maintain a dignified retirement lifestyle, BOOST your retirement savings via EPF today so that your future self will thank you!

  1. Contribute the maximum you can afford monthly for EPF at your employment, as i have checked there is currently no maximum ceiling. Only a minimum of 8%.
  2. Voluntary self contribution – deposit a maximum of RM5,000 per month into your account via online transfer or cheque payment. Total maximum annual contribution is RM60,000
  3. Register for i-Saraan for unemployed members – receive a 15% contribution from the government on the amount contributed, up to max of RM250 annually. 
  4. Register for i-Suri for housewives, single mothers, widows – government contributes RM480 annually

Why does it make sense to grow your retirement savings through EPF?

  1. Reap the advantages of high EPF dividends – the average 5-year dividend is 5.88%, much higher than the current FD rate of ~2%. EPF also has a minimum guaranteed dividend of 2.5% annually.
  2. Power of compounding – EPF members who started to make an additional contribution at a younger age generally will be able to save more for their retirement fund.
  3. To fully utilise your income tax relief –  Inland Revenue Board gives a relief of RM4,000 for EPF savings annually.
  4. Dividend up to age 100 – members will continue to earn dividends for the remaining portion of their EPF savings up to age 100.
  5. Your money is safe in EPF – with RM930bil of assets under management and as the world’s 12th largest pension fund, EPF employs robust security mechanisms to safeguard the fund. By adopting the latest developments in corporate governance which promotes strong leadership and good management practices to enhance accountability, transparency and long term success of EPF.

The Covid-19 pandemic has caused many people financial despair and triggered a dramatic rise in the number of gig workers. While gig work has helped many to survive, these gig workers are also falling back on their retirement security due to unstable or irregular income. As we recover from this crisis, we must also prioritise rebuilding our retirement savings to ensure a dignified retirement.

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