Only half of Malaysian workers contribute to EPF
The challenge had grown with the recent trend of a significant shift from formal to informal employment, especially after Covid-19.
SHAH ALAM - Only half, or 8.6 million, of Malaysia's more than 17 million active workers contribute to the Employees Provident Fund (EPF).
EPF Chief Operating Officer Sazaliza Zainuddin said that this significant gap presented a major challenge because awareness about the importance of retirement funds remains low and informal workers were not required to contribute.
He explained that currently, EPF is one of the oldest and largest retirement savings funds globally, with approximately 16 million members.
It has 8.6 million active members who have contributed at least once in the past 12 months.
"Our concern is not just for now but for 20 years down the line when people are 50 or 55 years old. If they don’t save from now, what will cover their expenses when they retire?
"I see one common misunderstanding is that EPF is only for employees, whereas it is for all Malaysians, whether they work formally or are self-employed.
"The difference is that for those with employers and working in the formal sector, EPF contributions are mandatory for both employers and employees. For self-employed individuals, such as gig workers, fishermen, farmers, or nasi lemak sellers, contributions are voluntary,” he said.
He made these remarks during the Interviu programme titled “EPF for All: Financial Literacy, Secured Future,” hosted by Haizir Othman at the Karangkraf Group Complex on Wednesday.
Sazaliza added that the challenge had grown with the recent trend of a significant shift from formal to informal employment, especially after Covid-19.
As a result, he said EPF is actively promoting the i-Saraan initiative to encourage more people in the informal sector to contribute.
“If they contribute to EPF, there will be additional incentives from the government. In 2024, the government will provide an additional 15 percent incentive up to a maximum of RM500 per year.
“Looking at 2023 alone, over 300,000 members benefited from this incentive and more than RM50 million in government incentives was credited to their accounts. This is to encourage them to continue contributing to EPF as a preparation for the future,” he said.
He noted that EPF is making continuous efforts to increase membership, and as a result, voluntary contributions have increased by 39 per cent in the first six months of this year compared to the same period last year.
In the first half of 2024, the number of voluntary contributors rose to 742,556 from 535,307 in the same period last year, with total collections of around RM7.5 billion compared to RM3.9 billion in the first half of 2023.
EPF mobile services reach rural areas
To facilitate interactions with EPF, he encouraged the public to make full use of the EPF i-Akaun app and visit the 69 EPF branches across Malaysia.
However, he said understanding the geographical challenges where some residences are far from branches, EPF also provides a Mobile EPF service, which started in 2023.
According to Sazalina, currently, there are 10 Mobile EPF trucks, with four stationed in Peninsular Malaysia and three each for Sabah and Sarawak.
“These trucks will be at specific locations to reach the people. For example, every Monday we are in Baling, Kedah, and on Wednesdays in Kota Kuala Muda, Kedah. In Pahang, every Thursday we are in Muadzam Shah. The same goes for Sabah, Sarawak, and elsewhere.
“In 2023 alone, we conducted over 2,000 outreach programs to facilitate members and all Malaysians in interacting with EPF. The Mobile EPF services include advising those who are not yet members.
“For EPF members, they can perform transactions such as making nominations, registering for Shariah savings, increasing contributions, and more,” he said.
Flexible account for emergencies only
Sazaliza added that EPF’s decision to restructure accounts from two to three—Retirement Account, Prosperity Account, and Flexible Account—is to help members balance short, medium, and long-term needs.
He explained that the Retirement Account can only be used when members are 55 years old, while the Prosperity Account can be used for other purposes such as buying a home, education, and healthcare.
"Currently, all money in the Flexible Account still earns dividends. Our advice is that if it is not urgent and not an emergency, leave it in EPF. It will continue to grow for your future needs,” he said.
Through the restructuring, contributions to the Retirement Account have been increased from 70 per cent to 75 per cent, while the Prosperity Account has 15 per cent, and the Flexible Account has 10 per cent.
“For some of us who have been working for a long time, the impact might not be obvious, but it actually benefits younger generations. A five per cent difference over 30 years when retiring will increase their savings by seven per cent compared to if we do nothing.
“Currently, all money in the Flexible Account still earns dividends. Our advice is to leave it in EPF if it is not an emergency. It will continue to grow for your future needs,” he added.
Meanwhile, when asked about EPF nominations, he explained that only 32 per cent of the 16 million EPF members had done so.
Nominations were crucial as they facilitated the withdrawal process in case of unforeseen events like the member's death.
He said that for non-Muslims, the nominee is the heir, while for Muslims, the nominee is the administrator of the estate.
“If you care about your family, register and update your EPF nominations to make things easier for them when you are no longer around,” he added.
Sazaliza said EPF has certified financial advisors at nearly all branches to provide retirement advice. To make EPF nominations, download and register through the EPF i-Akaun app to facilitate future management of your savings.
