Malaysians withdraw RM7.81 billion (US$1.66 billion) from retirement savings following national pension fund restructuring

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10th July 2024 – (Kuala Lumpur) Malaysian citizens have withdrawn approximately RM7.81 billion (US$1.66 billion) from their retirement savings following the restructuring of the country’s national pension fund in May. The latest data, as of June 24, shows an increase from the RM6.98 billion that had been withdrawn by 10th June.

The New Straits Times reported on Wednesday (10th July) that over 3.16 million members of the Employees Provident Fund (EPF) under the age of 55 have made withdrawals from their newly introduced “flexible” account. EPF, Malaysia’s retirement fund and one of the largest in the world with assets worth RM1.19 trillion, implemented the restructuring plan on May 11, allowing its members to access funds from this account to address short-term financial needs.

Reactions to the EPF restructuring have been mixed, with experts expressing concerns about potential repercussions on future retirement provisions. Some caution that the withdrawals may exacerbate a retirement crisis, while others worry that early withdrawals may hinder the compounding growth of savings over time.

On the other hand, proponents of the restructuring argue that it grants members greater flexibility in utilizing their funds. Previously, EPF members under the age of 55 were only permitted to make withdrawals for specific purposes. However, with the restructuring plan, these members now have three accounts instead of two.

Under the new structure, 75% of an individual’s monthly contribution is allocated to Account 1, 15% to Account 2, and the remaining 10% to Account 3—the newly introduced flexible account. Previously, 70% of contributions went into Account 1, and 30% into Account 2. Funds in Account 1 cannot be accessed until members reach the age of 55, while withdrawals from Account 2 are restricted to purposes such as housing, healthcare, and education.

EPF members have until August 31 to make a one-time transfer of one-third of their savings from Account 2 to Account 3. The Finance Ministry reported that 3.61 million individuals, accounting for 27.8% of EPF members under the age of 55, have already transferred funds to Account 3.

To date, approximately RM11.52 billion has been transferred to the flexible account, providing members with easily accessible funds. Additionally, RM5.12 billion has been transferred to Account 1 as part of the EPF funds restructuring.