Friends at work must be very familiar with the monthly payroll sent by the company, and although the salary for the position applied for is clearly RM 3,000, the actual monthly salary received is less than RM 3,000, and the inspection found that 11% of the monthly salary is used to pay EPF。

What is EPF?？Why salary must be used to pay EPF？EPF, what do you do with your money?

This article will give you an in-depth explanation of the background of EPF, EPF member contributions and calculations, the benefits of depositing EPF, EPF dividends and calculations, and other EPF FAQs.。

What is EPF?

EPF's full name is Employees Provident Fund, Chinese called Employees Provident Fund, Malay called Kumpulan Wang Simpanan Pekerja (KWSP).

Malaysia's Provident Fund Board is a national provident fund agency under the Ministry of Finance, whose main task is to manage the country's Compulsory Savings Plan.

The CPF Board will rigorously manage CPF members' deposits, invest the money and pay a fixed annual dividend to help members have a good pension at retirement age to enjoy their old age.

As of December 2022, the Provident Fund Board maintained 15.72 million member accounts, of which nearly 8.39 million were active accounts with continuous deposits.

As of January 17, 2024, according to a survey by the Sovereign Wealth Fund Institute, EPF currently has total assets under management of $238.1 billion (more than RM1m), ranking 19th among equivalent pension fund institutions worldwide.

The origin of EPF

The Malaysian Provident Fund Board was originally established in 1951 to force locals to deposit a small portion of their wages into the Board to help them build their pensions.

Through section 452 of the Employees Provident Fund Act 1991 (Employees Provident Fund Act 1991, Act 452), it is mandatory for employers to pay employee provident fund deposits and allows members to withdraw this pension under certain circumstances or at retirement age.

How will your salary be allocated to the EPF?How much to pay？

The Provident Fund Board requires each member and member's employer to make a separate monthly deposit for the member's account.

For members, 11 per cent of their monthly salary will be placed in the EPF account, while the employer will contribute an additional 13 per cent to the employee's account;。Therefore, you deposit at least 23% of your monthly salary in your account.

However, these two years have been hit by the epidemic, in order to reduce the burden on people's lives, the government's 2020 economic revitalization package, allowing members to choose whether to maintain the 11% contribution rate, or directly reduced to 7%。As economic activity improves, the Government announced in the 2022 Budget that the reduced contribution rate for members of the Provident Fund Board was changed to 9 per cent for a period of six months to June 2022.

Therefore, if your salary does not exceed RM5,000 and you choose to lower your contribution rate, it means that your deposit with the CPF Board in the first six months of the year will amount to 22% of your current salary (9% deducted from your salary and 13% paid extra from your employer).。But if you don't lower your contribution rate, it will total 24% of your salary.

Starting in July 2022, the employee contribution rate for all working people will be automatically adjusted back to 11%

Assuming your salary is RM4,000 and the contribution rate is 11%, your salary will be deducted RM440 and deposited into an EPF account.。Your employer is required to deposit 13%, or RM520, into your EPF account for you, and this money is not deducted from your salary, but is an additional contribution from the employer。Therefore, your EPF account will receive a total of RM960

What income should be paid EPF?？What income does not need to be paid?

Income due to EPF includes:

Salary bonus allowance commission bonus arrears of wages Half-day leave to wages Unused annual leave or sick leave to wages Paid maternity leave Paid study leave Other payments paid under contract or otherwise

Income not subject to EPF includes:

Service Charges Overtime Tips Pension Redundancy, Temporary Dismissal or Dismissal Benefits Any Tourism Allowance Any other remuneration or payment that may be waived by the Minister

* Data source: Provident Fund Board

Your money will be deposited into two accounts of the EPF.？What the hell is going on?

Every month when the company pays your salary, a portion of your salary will be deposited into your EPF account。EPF has a total of two savings accounts with different interest and withdrawal conditions。

EPF First Account (Akaun 1)

70% of your monthly savings will be placed in your EPF first account, which is mainly used as your future pension, making it more difficult to withdraw。

Therefore, withdrawals from the first account are only allowed if the member is 55 years old, physically or mentally handicapped, leaves the country or dies.。

In addition, in order to allow members to earn higher returns, the bureau is also open to members to invest money in their first accounts。

EPF Second Account (Akaun 2)

Seventy per cent of the monthly deposits are deposited in the first account, while the remaining 30 per cent are deposited in the second account.

The withdrawal conditions of the account are more relaxed, you can use the deposit of the second account to pay for the first installment of the house, loans, investments, education, medical expenses, or withdraw the deposit when you reach the age of 50.

EPF Third Account (Akaun 3 / Akaun Fleksible)

If you want to use the deposit in your first account, you can only choose to withdraw partially or fully if you combine your first and second accounts into Account 55 at age 55 or Account Emas at age 60.

Due to the strict withdrawal restrictions of EPF, it is very inconvenient for some people who need money urgently but cannot borrow it.

As a result, the government decided to introduce a third account (Account 3), also known as a flexible account (Flexible Account), in April 2024 in order to act as an emergency reserve for the people.

What are the benefits of depositing money into EPF?？

In addition to being able to withdraw a large amount of your pension after retirement, what benefits can you get from keeping your money in EPF?

1. EPF First Account Savings Recharge: You can voluntarily recharge your spouse or family's EPF account to increase their balance and enjoy more interest income.
2. Protection after incapacity: If you are unable to work, you can use the deposit
3. Death compensation: CPF will pay RM2,500 to members' immediate family members
4. Tax Exemption: Deposits placed in EPF can be used to withhold personal tax up to RM2500 per year
5. Stable payout ratio: The Malaysian Provident Fund Board will invest the savings you put in with your employer, the EPF perennial payout ratio will remain around 6%, and the interest will continue to snowball after it is deposited into your EPF account。In contrast, zero-risk bank time deposits (FDs) perform at interest rates of approximately 2-3%, and even if banks offer interest rate concessions for deposits, obtaining interest rates requires the task of investing in designated trusts or purchasing insurance.。This is naturally not as good as the 5% - 6% interest that EPF can earn by doing nothing.
6. Guarantee 2.5% minimum dividend: Under the Employees' Provident Fund Act 1991, the EPF's minimum dividend must be maintained at 2.5% annual interest, which in any case will not fall below this level
7. Trustworthy, low risk: As a mature investment institution, EPF's investment performance has always been trustworthy, and the annual interest rate can be maintained for a long time, which means that with such a good weekly interest rate return, your investment risk is quite low.

There are so many advantages to saving EPF, isn't there any harm?？In fact, the downside of EPF is its low liquidity and inability to use EPF deposits at will。You cannot withdraw your account deposits before you retire or if you do not meet certain withdrawal conditions

▍ EPF's annual dividend has always been a steady 6%？

EPF will invest the deposits in our accounts and return the returns to us in the form of dividends.

Therefore, the most important concern is naturally the EPF payout ratio; if you look at it from 2000 to the present, the EPF payout ratio is between 4.25% to 6.9%, and most of the time the payout ratio is between 5% and 6%.。The following is the EPF's annual dividend statement:

Year	Islamic Savings (%)	Traditional Savings (%)
2023	5.40	5.50
2022	4.75	5.35
2021	5.65	6.10
2020	4.90	5.20
2019	5.00	5.45
2018	5.90	6.15
2017	6.40	6.90
2016	-	5.70
2015	-	6.40
2014	-	6.75
2013	-	6.35
2012	-	6.15
2011	-	6.00
2010	-	5.80
2009	-	5.65
2008	-	4.50
2007	-	5.80
2006	-	5.15
2005	-	5.00
2004	-	4.75
2003	-	4.50
2002	-	4.25
2001	-	5.00
2000	-	6.00

* Source: Provident Fund Board

The Muslim Savings Account is a savings scheme managed and invested by the EPF in accordance with Muslim principles, but is not limited to Muslims.

EPF dividend, how to calculate the specific amount of interest you will receive.？

EPF interest is calculated on a daily basis; assuming you already have RM100,000 in your CPF account (RM70,000 and RM30,000 in your first and second accounts, respectively) and a monthly co-existence deposit of RM1,000 (the same 7-to-3 ratio is placed in both accounts), the CPF payout rate is 5%

Here is the formula for calculating how much interest is actually received:

Calculation of a single month

First account: {(total balance in account X number of days in the month) + (amount paid in the month X 1 day) X interest} / 365 days

Second account: {(total balance in account X number of days in the month) + (amount paid in the month X 1 day) X interest} / 365 days

We can then calculate the interest we can earn each month according to the above formula.

January Interest Algorithm

First Account: {(70000 X 31) + (700 X 1) X 5%} / 365

Second Account: {(30000 X 31) + (300 X 1) X 5%} / 365

February Interest Algorithm

First Account: {(70000 X 28) + (700 X 1) X 5%} / 365

Second Account: {(30000 X 28) + (300 X 1) X 5%} / 365

Then just use this algorithm to continue to December and add up the 12 months calculated for both accounts to get the full year interest.

Generally, the CPF Board announces the annual interest rate for the previous year around February and pays a dividend shortly thereafter

Are you self-employed and can you save EPF?？

Self-employed or those with no fixed income can make voluntary deposits to prepare for retirement through the EPF's Retirement Incentive Scheme (i-Saraan)

At the same time, as an incentive, the government will also make an additional contribution to those who choose the i-Saraan scheme; i.e. after you put in your deposit, the government will add an additional 15% to your i-Saraan account, but the additional one-year total will not exceed RM250.。

In addition, this voluntary deposit scheme is not applicable to members with traditional or Muslim accounts and can only be applied for by members under the age of 60.

Then again, members who choose the program can deposit money in a variety of ways, including online transfers, cash or cheque payments at the correspondent bank counter, or directly at the EPF counter.

If you don't have a job, can housewives save EPF?？

If they don't have a job, housewives can also save EPF through i-Suri or i-Sayang plans to plan for their pensions.

The difference between i-Suri and i-Sayang is that i-Suri is a housewife who can deposit her own provident fund as long as she is entered into the e-kasih system, while i-Sayang needs to transfer 2% of her husband's salary to her wife's provident fund account.

The specific operation and the amount of subsidy that can be obtained can be referred to the article.

▍ FAQ FAQ about EPF

What happens if the employer pays the EPF late？

The employer is obliged to pay the EPF deposit for the employee by the 15th of the following month (after pay)

If the employer pays late, a fine will be levied; the fine is calculated as the annual interest on the traditional or Muslim deposit account (whichever is lower) for that year, plus 1%.Meanwhile, the minimum fine levied is RM10

If the employer is unwilling to pay, he or she may face a sentence of several years in prison or a fine of tens of thousands of ringgit, or both.

How to check if the employer has made a contribution and if the EPF has deposited dividends into the account？

You can get a statement through i-Akaun, EPF Kiosks or any EPF counter in the country to confirm that your account has arrived

At the same time, you can also download the i-Akaun app from your phone to check your account

EPF first account can be used for investment？

The Provident Fund Member Investment Scheme (EPF-MIS) allows members, after meeting the minimum deposit in the first account, to invest up to 30% of the available balance in a trust fund approved by the relevant fund management agency.。In addition, the basic amount of deposit in the account is different depending on the age.。Please click here to view

Should the deposit be withdrawn from the RM10,000 special withdrawal approved by the government?

For those who are really hit by the epidemic and have become strapped for money, they should make good use of this emergency funding to get by.

In addition, please do not arbitrarily withdraw this money, after all, in the EPF to continue snowballing, the future can create good retirement funds for you

Do workers choose not to save EPF?

No, the government makes EPF mandatory for all migrant workers to avoid the tragic lack of money to live in later life.

How old can you start to save EPF?

As long as you are 16 years old, you can open an EPF account, and money deposited in an EPF account can also be paid dividends.

SUMMARY

As a national provident fund institution, it is definitely a favorable and cost-effective investment in terms of the future rate of return that the people can get and the risks they need to face.

Therefore, do not covet unimportant things and withdraw your account deposits at will.

For those who have previously withdrawn due to difficulties in life, the immediate priority is to rebuild EPF deposits after getting out of the predicament, so voluntary deposit schemes such as top-up savings, self-savings and i-Suri schemes are available.