What you need to know about tapping into your EPF to tide over tough times. 

In Malaysia, dealing with personal finance and money management for regular workers is likely to have been made more difficult due to the ongoing pandemic.

The loss of employment and wage cuts have prompted thousands of people, particularly in the private sector, to tap into their accumulated savings to resolve urgent financial emergencies. They also tap into the contributions their employers put in their Employees Provident Fund  (EPF).

For private-sector employees, who number approximately 14 million in the country, the EPF is a heart-felt topic for more than half of them as they are active contributors. This is the only obligatory provident fund that is contributed monthly by both employers and workers. The sum adds up to a minimum of 20% of the basic wage, although certain employers have higher seniority-based contributions for some of their employees.

#1. i-Lestari financial initiative

i-Lestari is a fund withdrawal facility from the second EPF account of an individual. The withdrawal sums to RM500 a month and is valid until 31 March 2021 for monthly withdrawals.

The scheme aims to ease the financial burden of members of the EPF to meet their basic monthly needs during the pandemic.

The scheme and other relief initiatives, such as lowering the minimum statutory contribution rate for workers from 11% to 7%, are projected to negatively impact ones accumulated savings in the future especially after retirement, despite the best intentions of the government.

How does i-Lestari work?

You do not have to request a new application every month to withdraw funds. Instead, from May 2020 until May 2021, all registrants will automatically be able to withdraw their desired amount every month.

Registrations until May 2021 will also remain available. Many who send their forms late, however, will only see their withdrawals take effect in the following month. Additionally, it can’t be backdated; you will withdraw your EPF savings from July 2020 until May 2021 if you register for i-Lestari in June 2020.

Bear in mind that the amount of withdrawal accepted is subject to the total amount of savings you have in your Account 2. You will earn a reduced sum in your future withdrawals if the residual balance is smaller than your applied amount. The monthly withdrawal amount submitted will be set when your application is approved and you can’t adjust the amount halfway during the scheme.

How to apply online for i-Lestari withdrawal

A special website solely for withdrawals under the i-Lestari programme was launched on 14 April 2020 by the EPF. EPF members can now easily apply through ilestari.kwsp.gov.my for i-Lestari withdrawals.

What you need to do here is log in or use the EPF i-Akaun app on the official EPF website. Navigate to the page for withdrawals (which should be near the website’s top right corner). From there when asked what sort of withdrawal you want to make, pick New Application and then i-Lestari.

If you want to register by email, you will need access to a printer and scanner. This is because the application form would need to be downloaded and filled in. Scan and e-mail it to ilestarimohon[at]epf.gov.my once you have filled up the form.

You can also directly mail your registration form to the EPF by post. During the MCO period, Pos Malaysia services are operational, so all you need to do is send the form to:

Kumpulan Wang Simpanan Pekerja
Karung Berkunci No 220, Jalan Sultan
46720, Petaling Jaya.

#2. EPF Account 1 withdrawal

The government’s proposal to encourage more contributors from the Employees Provident Fund (EPF) to withdraw from their Account 1 has drawn mixed reactions, with some opposing the proposal outright. Initially, the government intended to allow a monthly withdrawal of RM500 of up to RM6,000 over a year, benefiting 600,000 qualified contributors.

The EPF said the i-Sinar program is being fine-tuned and is the product of stakeholder consultation to ensure that donors can withdraw part of their savings as well as having enough for their potential well-being.

I-Sinar is an extension of the i-Lestari withdrawal facility, which is now projected to have reached an aggregate withdrawal of RM30 billion and will end in March. Applications for i-Sinar allowing withdrawals of RM500 per month for 12 months can be made from December 2020 and the balance will be credited to the bank accounts of the members from January 2021 onwards.

The drawback of the withdrawal

First, in these tough times, the majority of Malaysians seeking assistance are those with lower savings in their EPF accounts. The reduction of annual and cumulative dividends, in the long run, would result in a monthly withdrawal. This will gradually deplete the long-term savings of the most vulnerable low-income families.

Second, as they do not have active EPF accounts, many Malaysians won’t be able to benefit from this withdrawal scheme. 62% of some 22 million Malaysians of working age are self-employed and not protected by any formal social security. How, then would they fend for themselves during the Movement Control Order as a result of the lack of income?

Another alternative: Make use of existing government assistance

To get through these very tough times, using their hard-earned savings in Account 1 should not be the only way for contributors of the Employees Provident Fund (EPF) to get cash.

In stating this, Chief EPF Officer Tunku Alizakri Alias noted that through PRIHATIN, PRIHATIN SME+, PENJANA, and KITA PRIHATIN, the Government has provided direct financial assistance amounting to RM55 billion for the B40 and M40, as well as other focus groups and newly vulnerable groups.

 

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