EPF To Restructure Members' Accounts To Increase Savings For Retirement - A Good Move?

The Employees Provident Fund (EPF) will restructure its members' accounts from Jan 2 2007 in a move to enable them increase their savings for retirement. With the restructure, the number of accounts will be consolidated from three to two, comprising Account 1 (70 per cent of members' savings) and Account 2 (30 per cent of members' saving), its chief executive officer Datuk Azlan Zainol said in a statement Friday.

"Currently, there are three accounts, which are Account 1 (60 per cent of members' savings), Account 2 (30 per cent) and Account 3 (10 per cent)," he added. Azlan said the savings currently in Account 3, which are used for critical illness related withdrawals, will be incorporated into Account 2 initially.

Subsequent contributions after Jan 2 2007 will be channelled into Account 1 and Account 2 in the proportion of 70 per cent and 30 per cent respectively, he added.

This, he said, will result in members having a larger amount for housing, education, 50 years or medical withdrawals. "With the changes, members will have to prioritise their pre-retirement withdrawals carefully. This is because these withdrawals will be made from the same account, i.e. Account 2," he said.

According to Azlan, the restructuring of members' accounts from three to two will bring a multitude of benefits to members in the long run in the form of increased funds for retirement and greater flexibility and control over the management of funds for their current needs.

For the record, Account 1 cannot be withdrawn by members before they reach 55. However, members can invest a portion of their savings in Account 1 in investments managed by approved external fund managers.

Azlan said that effective Jan 2 next year also, for age 55 withdrawal before the actual dividend for 2006 is announced, the EPF will pay the minimum dividend of 2.5 per cent first on the withdrawal amount.

The balance will be paid when the actual rate of dividend is announced, he said, adding that with this move members will receive dividend payment based on the actual rate. Previously, dividend payment was paid based on the last declared rate.

He also said that the supplementary dividend payment will be credited into the member's bank accounts automatically not later than a week after the dividend is declared. Hence, members are requested to ensure that their bank accounts remain active, he added.

Azlan said that in proposing this change, the EPF has taken into consideration that retirement savings of members are depleted on an average of between one and 10 years upon full withdrawals at age 55.

To support this change, he said, the EPF's current IT system will be replaced by a newer IT structure. "As a result of this, members who have made application for withdrawals in the month of December 2006 will face a slight delay in their application process," he said.

However, he gave the assurance that it is temporary problem and these withdrawal applications are expected to be cleared before the end of January 2007. "We appeal to members' patience and understanding while we upgrade our IT system as this is done with their best interest in mind," he said. (Bernama)
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