EPF Malaysia 2024 - Everything You Need to Know.

If you work in Malaysia, you’re probably familiar with the Employees Provident Fund, or popularly known as EPF. It’s not simply another deduction from your paycheck; it’s your ticket to a safe retirement. As Malaysia’s principal retirement savings system, the EPF assists employees and volunteer contributors in growing their assets through regular contributions and judicious investments.

In this detailed overview, we’ll look at how EPF works, the most recent modifications for 2024, and how you can get the most out of your contributions.

What Is the EPF in Malaysia?

The Employees Provident Fund (EPF) is a mandatory retirement savings scheme for Malaysian workers, governed by the EPF Act 1991.

Both employees and employers contribute to the EPF, ensuring a steady buildup of funds for the employee’s retirement.

Over the years, the EPF has expanded to include voluntary contribution options, making it accessible to freelancers, self-employed individuals, and homemakers.

How Does EPF Contribution Work in Malaysia?

In Malaysia, EPF (Employees Provident Fund) contributions are mandatory for most private-sector employees.

Contributions come from both the employee and the employer and are calculated based on the employee’s monthly salary. Here’s a breakdown of the contribution rates:

Employee Contribution

11% of the employee’s monthly salary.
Employees have the option to contribute more than 11% voluntarily, but the minimum is fixed.

Employer Contribution

The employer’s contribution depends on the employee’s salary:

13% for employees earning RM5,000 or less per month.
12% for employees earning more than RM5,000 per month.

These percentages apply to both Malaysian citizens and permanent residents working in the private sector.

Foreign workers are not required to contribute to EPF, but employers can voluntarily register them.

What Counts as EPF-Eligible Income?

In Malaysia, contributions to the Employees Provident Fund (EPF) are calculated based on specific components of an employee’s salary. These components are defined by the EPF guidelines under the EPF Act 1991, and employers are responsible for ensuring accurate deductions.

Basic Salary
- The fixed monthly salary stated in the employment contract.
Fixed Allowances
- Regular allowances that are part of the employee’s remuneration package.
  - Examples:
    - Housing allowance
    - Transport allowance
    - Meal allowance
    - Cost of Living Allowance (COLA)
Incentives and Commissions
- Any recurring payments made as part of the employee’s job performance, such as sales commissions or regular incentives.
Guaranteed Overtime (OT)
- Overtime pay that is guaranteed or included as part of the employment contract.
Bonuses
- Contractual or guaranteed bonuses (specified in the employment contract).
Service Charges (for Hospitality Sector)
- Service charge payments made as part of regular income in industries like hospitality and tourism.
Payments for Leave
- Salaries paid for annual leave, sick leave, or maternity leave.

Components That Do Not Contribute to EPF

Certain payments and reimbursements are excluded from EPF contributions, including:

Reimbursements (e.g., travel, medical, or meal expenses).
Non-guaranteed overtime
Non-recurring or discretionary bonuses.
Termination benefits or gratuities.
Payment in kind (e.g., company cars, housing).
Ex-gratia payments (non-contractual goodwill payments).
If the performance bonus is given at the sole discretion of the employer and is not a guaranteed payment stated in the contract, it is NOT subject to EPF contributions. Such bonuses are typically given as a goodwill gesture or based on company profits.
- Examples:
  - “Management-decided bonus based on overall company performance.”
  - “One-off bonus to reward exceptional individual performance without prior agreement.”

EPF Accounts: Where Does Your Money Go?

Your EPF contributions are divided into three accounts, each serving a specific purpose:

Account 1 (70%)
- Primarily reserved for retirement savings.
- Funds in this account cannot be accessed until you reach the age of 55, ensuring financial security for your retirement years.
Account 2 (30%)
- Designed for specific withdrawals to support important life needs, such as:
  - Purchasing a home
  - Paying for education
  - Medical expenses
- Partial withdrawals are permitted under these predefined purposes, offering flexibility while maintaining long-term savings.
Account 3 (NEW in 2024)
- Introduced to provide support during emergencies, this account allocates 10% of total contributions for urgent withdrawals.
- Examples of eligible situations:
  - Job loss
  - Medical emergencies
  - Natural disasters

EPF 2024 Updates: What’s New?

This year has brought some significant updates to the EPF system, aimed at providing more flexibility and opportunities for Malaysians.

1. Emergency Withdrawals via Account 3

The newly launched Account 3 is a game-changer. It allows members to withdraw funds during emergencies without depleting their retirement savings.

2. Enhanced Voluntary Contribution Schemes

i-Saraan: For self-employed workers, this scheme now includes a 15% government matching incentive (up to RM500 annually).
i-Suri: For homemakers registered under the e-Kasih database, contributions now come with a 50% matching incentive (up to RM300 annually).

3. More Investment Choices with i-Invest

The i-Invest platform now offers:

Access to ESG-compliant (Environmental, Social, and Governance) investment funds.
Lower fees and more transparent management, making it easier for members to grow their savings.

4. Flexible Retirement Planning Options

Members can now fully separate their portfolios into Simpanan Shariah or conventional accounts, depending on their financial goals and ethical preferences.

5. Tax Relief

Personal tax relief for EPF contributions is RM4,000 annually, encouraging Malaysians to save more for retirement.

Why the EPF Matters in Malaysia

The EPF isn’t just about retirement—it’s about building a financial safety net. Here’s why it’s essential:

Long-Term Savings: EPF ensures that Malaysians have sufficient savings for their golden years.
Emergency Support: With the introduction of Account 3, the EPF now offers greater flexibility to handle financial emergencies.
Investment Growth: Contributions are invested in profitable ventures, growing your savings over time.
Inclusivity: The EPF’s voluntary schemes, like i-Saraan and i-Suri, make it accessible to everyone—not just salaried employees.

How to Maximize Your EPF Savings

Contribute More Than the Minimum
Did you know you can voluntarily contribute more to your EPF? Consider topping up your savings to maximize compound growth.

Leverage the i-Invest Platform
Take advantage of the i-Invest platform to diversify your investments. Look into low-risk ESG-compliant funds for sustainable growth.

Plan Withdrawals Strategically
Avoid withdrawing from your EPF unless it’s for a critical purpose like buying a house or medical emergencies. Early withdrawals can deplete your retirement fund.

Encourage Family Participation
Freelancers, self-employed workers, and homemakers in your family can benefit from the voluntary schemes. Help them register for i-Saraan or i-Suri to start building their savings.

Common FAQs

1. What is EPF, and who is required to contribute?

The EPF is a mandatory retirement savings scheme in Malaysia for private-sector employees and non-pensionable public-sector employees. Contributions are made by both the employer and the employee, with rates determined by law. Self-employed individuals and freelancers can contribute voluntarily.

2. What are the current EPF contribution rates?

For employees below 60:

Employer:
- 13% for salaries RM5,000 or below.
- 12% for salaries above RM5,000.
Employee: 11% of monthly wages (optional to contribute more).

For employees aged 60 and above, the rates are lower.

3. What is the difference between Account 1 and Account 2?

Account 1 (70%): Reserved strictly for retirement and can only be withdrawn at age 55.
Account 2 (30%): Allows withdrawals for specific purposes like buying a house, education, or medical expenses before retirement.

4. What is the withdrawal age?

Full withdrawal is allowed at age 55 for all accounts.
Partial withdrawals can begin at age 50 or earlier for Account 2 under specific circumstances (e.g., home purchase, education).

5. Can I withdraw my savings for emergencies?

Yes, under certain conditions. For example:

You can use Account 2 for medical emergencies.
The newly introduced Account 3 (2024) allows withdrawals for job loss, natural disasters, or other emergencies.

6. What happens to my savings if I leave Malaysia permanently?

Foreign workers and Malaysians emigrating permanently can apply for a full withdrawal of their savings. You must provide proof of permanent residence in another country.

7. Can I contribute to EPF voluntarily?

Yes, voluntary contributions are available for:

Self-employed individuals through the i-Saraan program.
Housewives under the i-Suri program.
Individuals can contribute up to RM100,000 annually.

8. Are EPF savings taxable?

Your contributions are tax-deductible up to RM4,000 per year (inclusive of life insurance premiums). However, withdrawals after retirement are not subject to income tax.

9. How do I check my my account balance?

You can check your balance through the following:

KWSP i-Akaun (online portal or mobile app).
Kiosks at branches.
Annual statements sent by EPF.

10. Can I transfer EPF savings to invest in approved funds?

Yes, eligible members can transfer a portion of their Account 1 savings to invest in EPF-approved unit trusts under the EPF Investment Scheme. The amount depends on your excess savings above the required threshold.

Conclusion: Your Money, Your Future

The EPF in Malaysia is more than just a mandatory savings scheme—it’s a critical tool for building a secure future. With the 2024 updates, you now have more flexibility, investment opportunities, and incentives than ever before.

Whether you’re an employee, freelancer, or homemaker, understanding and maximizing your EPF savings is key to achieving long-term financial stability.

For more information, visit the official EPF website. Start planning for your future today—because your retirement starts with the decisions you make now.

EPF Malaysia 2024 – Everything You Need to Know.