How the EPF works

An employee contributes part of each month’s salary to a national retirement fund. The fund keeps the money on the employee’s behalf and invests it so the balance can grow over time. When the employee retires—or meets a condition allowed by law—the fund releases the money either in one payment or in smaller amounts paid regularly.

What gets deducted Each month the employer removes a set percentage of the employee’s salary and sends it to the fund. At the same time the employer adds its own percentage on top of the salary. The percentages are set by law and can change from time to time, but the employer always pays the same share on every ringgit of salary it pays out.

What happens to the money The fund pools all the money it receives and invests it in a mix of assets: government bonds, corporate bonds, stocks listed on Bursa Malaysia, real-estate projects and other approved investments. A professional team inside the fund manages these investments to earn returns while keeping risk within limits set by regulators.

How the balance grows The fund does not simply add the new contributions to last month’s balance. Instead it credits each account with an annual dividend, which is a share of the profits the fund has made from its investments. The dividend is added to the balance, so the next year’s dividend is calculated on a larger amount.

Over many years this compounding effect can turn a steady stream of small contributions into a much larger retirement pot.

How to take money out The main ways to withdraw are:

• Retirement: when a member reaches the legal retirement age and stops working. • Withdrawal of savings: members aged fifty-five or older may request a full or partial withdrawal regardless of whether they continue working. • Incapacity: if a member becomes permanently unable or unfit to work, the fund may release part or all of the savings early.

• Leaving the country: a member who permanently departs Malaysia may request a full withdrawal after meeting certain documentation requirements. • Housing: members may use part of their savings to buy a first home or to reduce an existing housing loan, subject to rules on eligibility and limits. • Education: members or their children may use savings to pay for approved courses of study.

• Health: in cases of critical illness or permanent disability a member may apply for an early withdrawal under the fund’s medical scheme.

What the member receives When the fund approves a withdrawal it transfers the requested amount to the member’s bank account or issues a cheque. If the member chooses to take the money in smaller regular payments instead of a lump sum, the fund sets up an account from which a fixed amount is paid every month until the balance is exhausted.

What the member keeps Even after a withdrawal the fund continues to hold the remaining balance. Any future contributions or investment returns will still be added to that balance. A member who re-enters the workforce and starts contributing again will see new money added to the old balance, restarting the compounding process.

Who looks after the fund The fund is governed by a board of trustees who oversee the investment policy and ensure the fund operates within the law. Day-to-day management is handled by a professional team that reports to the board. An independent auditor reviews the fund’s accounts each year. Regulators set the rules on contributions, withdrawals, investments and fees.

What fees apply The fund charges a small annual management fee, calculated as a percentage of the total balance. The fee covers the cost of running the fund, paying investment managers and covering the regulatory and audit work. The fee is deducted automatically each year before the dividend is declared, so members see the net dividend in their statements.

What statements show Every member receives an annual statement that lists: • the total contributions received from the member and the employer during the year • the dividend credited for the year and the resulting balance • the member’s investment choices if any • any withdrawals made during the year • the member’s current nomination of beneficiaries for the fund in case of death

How to check the balance Members can view their current balance and recent transactions through the fund’s online portal, a mobile app, or by calling the fund’s contact centre. If a member suspects an error or unauthorised activity, the fund provides a formal process to raise a dispute and request a review.

What to watch when you see it in the news If a story mentions a change in contribution rates, it usually means the government has adjusted the percentages employers and employees must pay. A story about dividend rates often refers to the percentage of profits the fund has decided to credit to members’ accounts. Reports on new withdrawal rules may describe schemes such as housing or education withdrawals that have been expanded or restricted.