Malaysia: Relaxation of EPF withdrawal criteria
On 8 March 2021, Malaysia’s Employees Provident Fund (EPF) started allowing all EPF members under age 55 to withdraw a portion of their Account 1 balances under an early withdrawal option (i-Sinar) introduced in November 2020 in response to the COVID-19 pandemic.
The EPF provides social security retirement benefits on a defined contribution basis. Participation in the EPF is mandatory for all private sector employees. The EPF provides two types of individual accounts for members under age 55: 70% of contributions are allocated to Account 1, which funds retirement benefits, and 30% of contributions are allocated to Account 2, which can be accessed before retirement for education, buying a home, certain critical illnesses, and other approved expenses.
Previously, i-Sinar was only available to certain EPF members who had lost their jobs or experienced significant reductions in income due to the pandemic.
From 8 March 2021, under i-Sinar:
- EPF members with Account 1 balances of MYR 100,000 or less can withdraw up to MYR 10,000. Payments will be made over a period of six months with a first payment of up to MYR 5,000.
- EPF members with Account 1 balances above MYR 100,000 can withdraw up to 10% of their account balances or MYR 60,000, whichever is lower. Payments will be made over six months with a first payment of up to MYR 10,000.
This is the latest EPF-related measure by the Malaysian government to help offset the economic impact of the pandemic. Earlier in the pandemic, the EPF launched another early withdrawal option, the i-Lestari Account 2 Withdrawal Scheme. Under i-Lestari, fund members aged under 55 were able to withdraw MYR 50 to MYR 500 per month from their Account 2 balances from April 2020 through March 2021.
Whilst decisions to make withdrawals from the EPF belong to the employee, employers may wish to consider providing educational support to employees regarding these changes and the potential impact on employees’ retirement savings. Unless such withdrawals are made up later, they will have an adverse impact on employees’ retirement outcomes, which may not be fully appreciated by employees. This could be included as part of an employer’s financial wellness initiatives.
Most employers who make supplementary retirement savings in Malaysia do so by making additional employer contributions to the EPF on top of the statutory contributions. This might present an opportune time to review the additional contributions being made, and potentially to provide further retirement savings support to employees. Additional EPF contributions are a highly visible part of an employer’s reward offering and tend to be highly valued by employees in Malaysia.
Contacts
Isabel Coles
Head of International Consulting, MBWL International
VIEW PROFILE
Email:
isabel.coles@mbwl-int.com
Tel: +44 20 3949 5710
Isabel Coles
Head of International Consulting, MBWL International
A multilingual expert in employee benefits for multinational corporates.
Isabel heads up MBWL International, advising multinational organisations on their employee benefits arrangements around the world, with a focus on corporate sales and purchases, accounting disclosures and the financing, risk management and design of benefit plans.
Her vast experience includes leading global accounting consolidations under international, UK and US accounting standards for multinational companies headquartered in the UK and overseas – with consolidations ranging in size from two to over 50 defined benefit plans.
She has advised both corporate and private equity buyers on the employee benefit considerations (including pension liabilities) associated with corporate sales and purchases in Europe and worldwide, from due diligence through to closing and subsequent integration work. Isabel has also undertaken many benefit audits and benchmarking exercises, including a 25-country audit for a company in the technology sector.
Other areas of Isabel’s expertise include reviewing and establishing international pension plans, advice on individual expatriate employee benefit packages and supporting multinationals in agreeing and implementing global governance approaches and policies for managing their employer benefit plans.
Isabel chairs the International Committee of the Association of Consulting Actuaries and is fluent in German and French.
Lin Fong Chow
Practice Leader - Employee Benefits Malaysia, Milliman
Contacts
Isabel Coles
Head of International Consulting, MBWL International
VIEW PROFILE
Email:
isabel.coles@mbwl-int.com
Tel: +44 20 3949 5710
Isabel Coles
Head of International Consulting, MBWL International
A multilingual expert in employee benefits for multinational corporates.
Isabel heads up MBWL International, advising multinational organisations on their employee benefits arrangements around the world, with a focus on corporate sales and purchases, accounting disclosures and the financing, risk management and design of benefit plans.
Her vast experience includes leading global accounting consolidations under international, UK and US accounting standards for multinational companies headquartered in the UK and overseas – with consolidations ranging in size from two to over 50 defined benefit plans.
She has advised both corporate and private equity buyers on the employee benefit considerations (including pension liabilities) associated with corporate sales and purchases in Europe and worldwide, from due diligence through to closing and subsequent integration work. Isabel has also undertaken many benefit audits and benchmarking exercises, including a 25-country audit for a company in the technology sector.
Other areas of Isabel’s expertise include reviewing and establishing international pension plans, advice on individual expatriate employee benefit packages and supporting multinationals in agreeing and implementing global governance approaches and policies for managing their employer benefit plans.
Isabel chairs the International Committee of the Association of Consulting Actuaries and is fluent in German and French.
Lin Fong Chow
Practice Leader - Employee Benefits Malaysia, Milliman