Everything about The Employees Provident Fund totally explained
The
Employees Provident Fund (
Abbreviation:
EPF) also known in
Malay as
Kumpulan Wang Simpanan Pekerja (Abbreviation:
KWSP) is a government organisation in charge of
social security or
retirement planning for legally employed workers in
Malaysia. Membership to the EPF is mandatory for working
Malaysian citizens, or non-Malaysian citizens who are either
permanent residents or have been EPF members before 1 August, 1998.
Overview
The Malaysian EPF was formally founded after the enactment of the Employees Provident Fund Act 1991 (Act 452), which grants employees retirement benefits via a body that's intended to manage their savings. As of 31 December, 2006, a total of 11.4 million members have registered to the EPF, of which 5.4 million are active and contributing members, and 416,000 are active employers.
Savings and investments
As of 2007, the EPF functions by procuring at least 11% of each member's monthly salary and storing it in a savings account, while the member's employer is obligated to additionally fund at least 12% of employee's salary to the savings at the same time.
In addition, the EPF further elaborates dividend rates and their performances are calculated and influenced based on the full distribution of net EPF revenue, depending on the return on investments that in turn is based on asset allocation.
The EPF also attributes the declining interest market rate since 1996 to the
interest market rate. Because 75% of investment funds are concentrated towards bodies closely linked to trends in the interest market rate, including Malaysian Government Securities,
loans or
bonds, and money market instruments, low interest rates for the past few years had an adverse effect on returns for EPF investments. The change was described as a disadvantage to tens and thousands of members compared to those under the pension scheme as the former isn't given free medical treatment after retirement, and was described as a form of discrimination towards senior members. and later states that members can contribute at any amount above the slashed contributed amount. The EPF guideline for employers of foreign workers remains unchanged, citing that the policy has been implemented before in 1998. Withdrawals are also possible when a member will
emigrate, becomes
disabled, or requires essential medical treatment. Members above 55 years old can choose not to withdraw EPF savings immediately and withdraw only later, and, under existing guidelines, employers may continue to contribute 12% of the members' salaries at their own discretion.
Further Information
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