EPF’s restructuring of its savings system caters to both long-term retirement needs and short-to-medium-term financial requirements. – February 19, 2025
Malaysians withdrew RM12.07 billion from EPF Flexible Account till Dec 31, last year: Amir Hamzah
The Deputy Finance Minister II stated that these withdrawals involved 4.11 million members, which represents 31.1 per cent of the total 13.2 million EPF members under the age of 55.
THE total withdrawals from the Employees Provident Fund (EPF) Flexible Account reached RM12.07 billion as of December 31, 2024, according to Datuk Seri Amir Hamzah Azizan.
The Deputy Finance Minister II stated that these withdrawals involved 4.11 million members, which represents 31.1 per cent of the total 13.2 million EPF members under the age of 55.
"The total remaining balance in the Flexible Account is RM7.73 billion," he said during his ministry’s address on the motion to express gratitude for the Yang di-Pertuan Agong's speech in the Dewan Rakyat today.
For the record, EPF underwent a restructuring of accounts on May 11, 2024, dividing them into three accounts.
The Flexible Account was introduced to assist members in managing short-term financial needs, allowing withdrawals at any time for any purpose, particularly in emergencies. And, is designed to offer quick access to savings for short-term financial needs.
As a result, the government has indicated that further targeted withdrawal schemes may no longer be necessary, as members now have a flexible means of accessing their savings, he said.
“With these measures, the government aims to ensure that EPF members can manage their finances effectively, building financial resilience in an ever-changing and challenging environment.
“The government has also announced key changes to the Employees Provident Fund (EPF), which will impact foreign workers and introduce more flexible savings options for local contributors.
As part of the Budget 2025, the government has proposed mandatory EPF contributions for all foreign workers in Malaysia.
“This initiative aims to ensure equal treatment for both local and foreign workers, as currently, the cost of hiring foreign workers is lower due to the lack of mandatory EPF contributions. The policy change is expected to level the playing field, potentially encouraging employers to hire more local workers.
“The mandatory contributions will be set at 2% for both employers and employees, with further adjustments to be considered based on future studies,” he added.
This expansion of the EPF coverage is not only about creating fairness but also aims to strengthen the competitiveness of local businesses globally, reduce dependency on foreign labor, and encourage a shift towards automation in various industries.
Moreover, it is designed to provide social security protection for foreign workers in line with international labor standards, such as those set out in Article 68 of the International Labour Organization's (ILO) Convention 102.
In a related development, Amir Hamzah said the EPF introduced a restructuring of its savings system in May 2024, aimed at providing more flexibility for contributors.
H explained, the new system includes three types of accounts designed to cater to both long-term retirement needs and short-to-medium-term financial requirements.
The restructuring comes after the financial strain caused by the COVID-19 pandemic, which led to the introduction of four special EPF withdrawals—i-Lestari, i-Sinar, i-Citra, and a special withdrawal scheme—which helped members navigate the economic crisis.
The new EPF account structure includes the Retirement Account (Account 1), primarily designed for long-term retirement savings. This account will hold 75% of a member’s contributions, which will only be accessible at age 55.
The government aims to ensure that each member has at least RM240,000 in their Retirement Account to support a basic monthly income of RM1,000 for 20 years, in line with Malaysia’s average life expectancy, he added.
On a separate note, Amir Hamzah drew reference to question raised by lawmakers on the Medical and Health Insurance and Takaful Premiums (MHIT) to which he answered ensuring the long-term sustainability and affordability of MHIT products is a critical priority, requiring coordinated efforts from all stakeholders in the healthcare sector.
“Bank Negara Malaysia (BNM) is working closely with the Ministry of Health, Ministry of Finance, private hospitals, insurance companies, and takaful operators to develop long-term solutions to effectively control the rising inflation of medical costs,” he said.
Regarding the proposal to establish a special committee involving various agencies or ministries, this is part of the initiatives outlined in the Ministry of Health's White Paper on Health to strengthen coordination among all relevant parties. T
This effort includes implementing the Diagnostic-Related Group payment model, enhancing transparency in drug pricing, and providing comparative data on standard medical costs.
Other measures to address the rising medical costs, as announced by Prime Minister Datuk Seri Anwar Ibrahim, are currently under consideration by the Ministry of Health. These include amendments to the Private Healthcare Facilities and Services Act 1998 (Act 586) and diversifying sources for pharmaceutical supplies to ensure more affordable prices.
As such, BNM has introduced interim measures to mitigate the impact of rising MHIT premiums/contributions on policyholders and these steps include distributing adjustments to premiums/contributions caused by medical claim inflation over a period of at least three years, with this policy being effective until the end of 2026 and a one-year delay in adjusting premiums/contributions for policyholders aged 60 and above, who are covered under the minimum plan of their MHIT product.
He added, policyholders whose policies expired or were surrendered in 2024 due to the premium/contribution reset can contact their respective insurance or takaful operators to request the reactivation of their policies, based on the adjusted premiums/contributions.
These measures aim to reduce the financial burden on policyholders while ensuring the sustainability of medical insurance and takaful plans in the face of rising healthcare costs, Amir Hamzah said. – February 19, 2025
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