No More RM 50 Minimum Voluntarily Contribution Amount for EPF Savings
While Malaysians start to realize the importance of retirement planning and the benefits of early retirement savings, the Employees Provident Fund (EPF) has come up with good news by scrapping the minimum RM 50 contribution amount for voluntary contribution.
A Closer Look at the New Policy
From July 1, 2018 onwards, members who voluntarily contribute to their accounts can decide to contribute any amounts, up to a contribution ceiling – RM60, 000 per year. Members can choose to fund their EPF accounts voluntarily through different channels, be it via the 1Malaysia Retirement Scheme (SP1M), or top-up savings contribution, or self-contribution.
What Does the New Policy Mean to Malaysians?
In Malaysia, every full-time employee is entitled to have access to employer-funded EPF savings account – the employer will contribute the amount that is equivalent to the 13% of employee’s salary amount to his or her EPF account. However, those who are not a full-time employee will be left with no proper retirement savings scheme. Many times, those without full-time job (freelancers, part-timers or self-employed people) found that the biggest challenge is when they attempt to start saving, they do not have enough money to spend, let alone to set aside a portion of their income to save. There might be months where they come up a little short, and do not have as much to save. They might also find that they have limited retirement savings or investment choices.
Before the new no-minimum-contribution-amount policy come into the picture, the Malaysian government has already put in the effort to increase retirement literacy among netizens as well as to prepare the self-employed to gain a foothold in their retirement planning. One of the most-praised initiatives is the 1Malaysia Retirement Scheme (SP1M), a retirement saving scheme that is similar to that of EPF. Aimed to help the self-employed and people without fixed income to start saving for their retirement, the 1Malaysia Retirement Scheme (SP1M) is designed in such a way to encourage people to contribute voluntarily within their own capacity. Similar to EPF, members of SP1M will receive yearly dividend according to the rate declared by EPF for the year until the age of 75.
The new policy has brought the glad tidings to self-employed citizens as well as citizens with no fixed income. The scrapping of minimum EPF contribution amount means more flexibility in building up retirement fund. It is a realistic method that can help self-employed and gig economy employees (freelancers and part-timers) to save up while running his or her business. It actually encourages people to save as much as they can, and as often as they can.
As time goes on, people will find that their incomes increase and that they can save more. As they save more, their initial investments grow in value. Eventually, the power of compounding will have the snowball effect on the savings figure.