Flexible Account optional, RM25b in withdrawals slated for first year - EPF

The Employees Provident Fund’s (EPF) much-talked-about Account 3, known as Flexible Account, is optional for its 16.07 million members, said its chief executive officer Ahmad Zulqarnain Onn.

Flexible Account is a new account that provides flexibility for short-term financial needs, where savings in this account can be withdrawn at any time according to members’ needs.

The EPF said starting May 11, all EPF members under the age of 55 will have their accounts restructured into three accounts, namely Retirement Account, Sejahtera Account and Flexible Account.

Balances in Account 1 and Account 2 will remain in the Retirement Account and Sejahtera Account respectively, while Flexible Account will start with a zero balance.

Between May 11 and Aug 31, members aged 55 years and below will have a one-time option to transfer part of their savings in their Sejahtera Account (previously Account 2) as an initial amount to the Flexible Account.

If the member does not choose to opt in, no transfer will be made and the existing balance will remain in the Sejahtera Account, the EPF said in a statement.

For all those who opt-in, allocation into the new accounts will be as follows: 75 percent into the Retirement Account, 15 percent into Sejahtera Account and 10 percent into the Flexible Account.

Previously, EPF members’ savings would be credited into Account 1 and Account 2, where 70 percent of their contributions would go into Account 1, and 30 percent into Account 2.

“We encourage people not to do so (opt-in) because it is important to save for old age, but we understand that flexibility is desired and from time to time you need to access your savings to pay for unexpected expenses,” Zulqarnain said during an editors briefing ahead of the announcement today.

The initiative is not just EPF’s response to current needs but is also a proactive step to help members in facing the changing job landscape and demographics of the population.

No impact on EPF’s portfolio

He said if every EPF member decides to opt in, the total fund that would be moved to Flexible Account will amount to RM57 billion, of which about RM25 billion is expected to be withdrawn in the first year.

The setting up of the new account will not have an impact on EPF’s portfolio, he said.

For comparison purposes, total withdrawals during the pandemic amounted to RM145 billion.

“The current scenario is much different from during the pandemic and our portfolio is now much bigger. Hence, the impact of withdrawals through the new account is expected to be muted,” he said.

Going forward, it is estimated that withdrawals from the Flexible Account will amount to between RM4 billion and RM5 billion yearly, said Zulqarnain.

Dividends will remain the same across all three accounts. However, this could change in the future as liquid assets - by default - do not attract higher interest rates or dividends, he explained.

Flexible Account withdrawals

Members can withdraw from the Flexible Account at any time for any purpose, subject to a minimum withdrawal amount of RM50.

Applications for withdrawals from this account can be made online through KWSP i-Akaun or at any EPF branches nationwide, he said.

Members who have yet to register with KWSP i-Akaun are encouraged to do so for them to withdraw from the Flexible Account.

As for the 55 Account and Gold Account, as per current practice, all savings in the Retirement Account, Sejahtera Account and Flexible Account of members who have reached age 55 will be merged into the 55 Account.

New contributions received by members from the age of 55 will be credited to the Gold Account.

- Bernama