LABOUR BULLETIN : Members can still withdraw EPF funds at 55

Wednesday, May 29, 2013

Members can still withdraw EPF funds at 55

GAINS: New retirement age wont' affect withdrawals

KUALA LUMPUR: EMPLOYEES Provident Fund (EPF) contributors will still be able to make partial and full withdrawals from their retirement funds at the ages of 50 and 55 despite the minimum retirement age being increased to 60 on July 1.

Newly appointed chief executive officer Datuk Shahril Ridza Ridzuan said the new minimum retirement age would be advantageous to its 13.6 million members.

"Our members will gain five additional years of contribution from themselves and employers. This will mean additional funds for them when they retire," Shahril said at the EPF headquarters here yesterday.

Despite the new retirement age, contributions for employees and employers will remain at 11 per cent and 12 per cent (13 per cent for those earning less than RM5,000) until the employee reaches 60.

Even though members can make a full withdrawal of their contribution at 55, Shahril urged them to be prudent.

"I urge members to look at withdrawing their retirement funds gradually or participate in a flexible withdrawal arrangement because if you withdraw everything in one lump sum, it will be hard to manage and possibly exhausted in three to five years.

"If the fund is exhausted, the additional five years of contribution will not be enough for your retirement."

The government raised the minimum retirement age to 60 from 55 effective July 1.

The move is aimed at increasing contribution to the economy as the average life expectancy of Malaysians had increased to 77 years from the average 65 years when the minimum retirement age of 55 was enforced.

The flexible withdrawal arrangement being promoted by EPF allows contributors to structure their withdrawals voluntarily so that they can decide what amount they would like to withdraw monthly after retirement.

"It's entirely up to the contributors to decide on the amount. Some might want to take a portion of their contributions to pay off debts while the balance is placed under a flexible withdrawal plan."

Shahril said employees must plan their retirement carefully and manage their retirement funds from the first day they start work.

"They have to be more aware now and start planning for their retirement."

Shahril said this was because 90 per cent of EPF members earned less than RM5,000 a month and by the time they reached 55, their total retirement savings would be less than RM120,000.

He said this was why EPF supported the move to raise the minimun retirement age to 60 as it helped to boost retirement savings.

"EPF savings alone are not enough. It is essentially basic savings for retirement.

"Contributors have to opt for alternative channels, such as private retirement schemes, to complement their EPF savings."

On whether it was possible for EPF to pay higher dividends this year compared with last year's 6.15 per cent, Shahril said any change would not be too volatile.

"What is important is that EPF provides a consistent rate of return."

EPF is the world's sixth largest provident fund with RM536.5 billion worth of assets under its management.