Civil servants' salary hike can also contribute to savings in EPF Account 3

SHAH ALAM - The raise in salary for civil servants of more than 13 per cent starting Dec 1, this year can contribute to the increment of emergency saving funds under the Employees Provident Fund (EPF) in Account 3, which is the Flexible Account.

Islamic Science University of Malaysia (USIM) Economics and Muamalat Faculty Banking and Finance senior lecturer Dr Mohd Faisol Ibrahim said the salary increment initiative was a stimulus factor towards building peace among workers when they retire later.

"The impact of the salary increment is that the amount of savings for retirement will also increase. Other than that, workers will enjoy extra income that they can probably keep at other places as emergency funds without having to interfere or cash out money from Account 3.

"This will make the savings amount in Account 3 increase because no withdrawal is being done by users because they have the increment of the salary to help them with the probable excess money from it," he told Sinar.

He added that the announcement by the government will make workers happy because it can influence them to give their best during their service while working.

"The impact is that the workers' productivity will increase while also having a positive impact on the performance of the company.

"This is because many financial problems can be solved well and comfortably with the increase in salary," he said.

EFP announced that Account Restructuring exercise starting May 11, 2024, will be launched, where all accounts for contributors under the age of 55 will be divided into three accounts, which were the retirement account, the wellbeing account and the flexible account.

The savings in the Flexible Account can be withdrawn anytime according to the needs of the contributor and will start with zero balance while the balance in Account 1 and Account 2 remained.

All contributions after May 11, 2024, will be allocated into the new accounts according to the following fraction: 75 per cent into the retirement account, 15 per cent into the wellbeing account and 10 per cent into the flexible account.

Aside from that, Prime Minister Datuk Seri Anwar Ibrahim announced that the civil servants' salary scheme showed a 13 per cent increment, which was the highest amount in history for civil servants across the country, starting Dec 1.

Anwar said the salary modification will involve an allocation of more than RM10 billion, following the most drastic and best-yet-ever salary increment in the country's history.

He explained that with the adjustment, the minimum salary for public workers covered the fixed salary and allowances, which have to be more than RM2,000 a month.

In the meantime, Bank Muamalat Economics Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the salary increment will not have a significant impact on EFP Account 3 because most have opted for the pension scheme.

"The salary increment is subjected to public workers where the average worker has chosen a pension scheme and not an EFP scheme.

"Only the new public workers who have contributed in the past three years would be affected. So, the impact is not felt that much since many have chosen the pension scheme," he said.

Afzanizam said the impact of the salary increment on the country was the increase in expenses, which will to some extent contribute to economic development.

"Other than that, it can work as a moral boost among the civil servants to improve their productivity in government service and at the same time facilitate business operations and public dealings with the government," he said.