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The way EPF handles your monthly monetary contributions is about to change. Previously, both you and your employer (if any) funnel those contributions to EPF, who then splits that amount 70:30 respectively into Account 1 and Account 2. Account 1 stood for the amount that you cannot withdraw no matter what until you’re 55 or permanently incapacitated; Account 2 can be accessed for educational, housing, medical, and haj purposes, and also when you’re 50. That much is still the same, but there are several new terminologies you’ll have to start keeping track of starting 1 January 2017, namely Akaun 55 and Akaun Emas.

What is Akaun 55?

Akaun 55 is basically an amalgamation of Account 1 and Account 2 that you’ve been contributing to all this while. Remember how you’re able to fully withdraw your EPF funds once you’re 55? Well, that’s what Akaun 55 stands for: once you hit 55, Account 1 and Account 2 will merge into a single Akaun 55 so you’ll only need to withdraw from one account instead of two.

What is Akaun Emas?

Akaun Emas is EPF’s answer to the typical Malaysian’s alarming lack of retirement funds once they retire. The figure stands at 78% as of May 2016, based on a basic savings amount of RM196,800 which will allow a retiree to spend RM820 a month over the next 2 decades of their lives. Doesn’t sound like much? It isn’t, especially not when you live in a city, but it’s better than nothing and certainly very unachieveable at the moment if EPF savings is all you have saved up for retirement and you’re one of the 78% EPF is targeting.

Akaun Emas Characteristics

The afore-mentioned Akaun 55 is formed when you’re 55 and comprises your Account 1 and Account 2, and you’re able to fully withdraw your funds at that time. But what if you continue working past 55? That’s where Akaun Emas comes in. Once you’re 55 and above, your funds get parked there, and they’re locked no matter what until you hit 60 or file for permanent incapacitation under the Incapacitation Withdrawal Scheme.
Then, once you’re 60, any remaining funds in your Akaun 55 gets combined with your Akaun Emas, so that you once again have only one account to your name.

Why is EPF Becoming So Complicated?

EPf could have just raised the full withdrawal age to 60 years, but they chose to implement Akaun Emas instead due to an outcry from the public over this proposal. Apparently, Malaysians weren’t too keen on the idea of locking their funds for even longer in EPF, even if it does guarantee a minimum 2.5% dividend annually, a percentage it often out-performs. 94% of respondents from EPF’s Members Consultation Exercise preferred to be able to withdraw in part or in full their EPF funds when they hit 55, and allow EPF to lock only new funds contributed between 55 and 60 years of age (and beyond, if so desired).

In Summary

  • From the moment you start working until you’re 55, your funds go into Account 1 and 2.
  • When you’re 55, your funds are combined into Akaun 55.
  • Between 55 and 60 years old, any new funds go into Akaun Emas, which can fully withdrawn only when you’re 60.
  • The dividend rate is the same for all accounts.
  • Dividends will continue accumulating so long as you maintain funds in any account.
Image via The Star Online

Conclusion

Akaun Emas is basically EPF’s way of encouraging/forcing you to save up more and for a longer period of time in view of our increasing life-spans and decreasing ways to self-support ourselves upon retirement. Think about Akaun Emas as a form of investment: when you’re 60 you’ll be much more ready to enjoy retirement than when you’re 55, and your funds will be working for you in the meantime. That isn’t so bad, now is it?

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