EPF Basic Savings goes up starting January 2014

A bit of EPF news that some contributors will welcome but I am sure some will not be happy as it will be less money for investment in other EPF approved private funds which could bring higher return than the normal yearly return given by EPF. 

EPF to raise members’ basic savings level

KUALA LUMPUR: The Employees Provident Fund (EPF) will revise upwards the basic savings quantum of its members to RM196,800 by the age of 55 effective January 1 2014, to ensure enough savings to finance their retirement needs.

The new quantum will be equivalent to RM820 a month for 20 years from age 55 to 75.

The current basic savings amount, which was set in 2008, is RM120,000 at the age of 55. 

“The new rates are benchmarked against the minimum pension for public sector employees which are currently at RM820 a month. 

So, the monthly retirement income does not fall below the poverty level,” EPF deputy chief executive officer (operations) Datuk Ibrahim Taib told a media briefing here yesterday.

Following the revision, members need to have more in their accounts to be eligible for the EPF Members Investment Scheme, under which savings are invested in unit trusts.

The basic savings rate will be revised every three years based on retirement needs, inflation rate and cost of living.

EPF has identified six common issues and challenges faced by Malaysians in retirement planning. They include longevity, early retirement, insufficient retirement savings, lump sum withdrawal, family structure and financial planning behaviour.

“Malaysians today are blessed with a longevity that extends to 75. As such, sustainability in savings is very important without having to be a financial burden to their loved ones,” Ibrahim said.

In this respect, the current rate of EPF contribution from employers (12 per cent) and employees (11 per cent) which will be maintained until age 60, would help boost savings for retirement.

(The rate from employers is 13 per cent for employees earning a monthly salary of RM5,000 and below.)

EPF also strongly advised members to start their retirement planning early to ensure a secure retirement. They were also urged to stretch their retirement savings over a longer period via flexible withdrawal options.

Read in full here.