IT is important for Employees Provident Fund (EPF) contributors to evaluate their financial situation and needs before signing up for the new EPF initiative as it may affect their retirement funds, says Wanita MCA.
Its national chairperson Wong You Fong said special counters should be set up at EPF offices and public campaigns organised to help contributors gain better insight of Account 3.
Starting May 11, EPF members will have their accounts restructured from two to three.
Contributions will also be split three ways: 75% will go into Akaun Persaraan (Account 1), 15% into Akaun Sejahtera (Account 2) and 10% into Akaun Fleksibel (Account 3).
Funds in Akaun Sejahtera can be used for housing, healthcare, education and insurance while Akaun Fleksible can be used for short-term financial needs.
Below is the full statement from Wanita MCA national chairperson Wong You Fong:
The Employees Provident Fund (EPF) should hold information sessions or set up special counters at EPF office and other public domains to enable contributions to decide whether to transfer a portion of their savings from the conventional account (Account 1) to the Akaun Fleksibel (Account 3) as initial capital. Contributors need to acquire a precise comprehension of the pros and cons of this scheme before making a choice by Aug 31, in order to plan the best arrangements and decisions.
The purpose of EPF introducing this scheme is to enable contributors to cope with or balance their daily living needs. However, if the scheme is not fully understood by contributors, it can often have adverse effects and even affect retirement planning.
EPF needs to factor in that some contributors may not need the Akaun Fleksibel. Additionally, the dividend percentage on the Akaun Fleksibel should not be higher than that of Account 1 and Account 2. Contributors who do not need the Akaun Fleksibel should be allowed to continue to enjoy higher dividend rates. Automatic allocation to the Akaun Fleksibel will cause inconvenience unless the dividend on the account is identical.
Commencing May 11, the EPF account restructuring for employees under 55 years of age will allocate a starting balance of zero to the newly added Account 3 for flexible withdrawals, with a contribution allocation of 10%. After restructuring, Account 1 will be renamed as the Akaun Persaraan with a contribution allocation of 75%. Meanwhile Account 2 will be renamed as Akaun Sejahtera with a contribution apportionment of 15%, and the newly added Account 3 will be named as Akaun Fleksibel with a contribution allotment of 10%.
Whilst EPF contributors may make good use of this scheme as Akaun Fleksibel has its advantages, contributors need to be cautious and exercise self-restraint. Contributors should choose savings plans based on their own circumstances.
This scheme allows contributors to deposit additional savings beyond the minimum EPF savings requirement into the Akaun Fleksibel. Meanwhile, contributors may also deposit extra savings for specific purposes.
With this provision of greater financial flexibility, Akaun Fleksibel enables contributors to meet sudden financial needs or achieve specific financial goals. Nevertheless, contributors need to manage the usage of their EPF accounts prudently for priority purposes such as education, home purchase, medical expenses, etc.
Some contributors may withdraw their EPF savings for investments. However, they need to be aware of the risks, as they are subject to market fluctuations and risks. Investment returns are not guaranteed, and contributors may face the risk of investment losses.
While withdrawing funds from Akaun Fleksibel early can address specific financial needs, it may result in insufficient retirement funds. Contributors should evaluate their financial situation and needs besides carefully considering the consequences of early withdrawal as it may affect their long-term financial goals, such as retirement savings. Hence, contributors need to assess their financial objectives.
