Malaysian employees are automatically saving for their retirement, as well as housing needs and medical needs, through their monthly EPF contributions. Apart from mandatory EPF contributions from your salary, you can also make voluntary contributions to upsize your EPF savings.
Every month, employees are required to contribute 11% of their monthly salaries to their EPF while employers contribute up to 13% of the employees’ salaries to their EPF.
On top of this, you have a cap of RM100,000 for your voluntary self-contributions each year. If you have excess savings, voluntary EPF contributions will not only boost your retirement savings, but also earn you tax relief and pay you an attractive interest return.
Savings in your EPF will earn a guaranteed dividend of 2.5% p.a., but the fund has consistently delivered annual dividends of more than 5.0% for conventional savings over the last decade.
Being one of the few funds that provide guaranteed dividends, and potential upside in good years, EPF is considered a relatively safe avenue for growing your savings, making it a popular option for Malaysians. As of January 2023, a total of RM527million in voluntary contributions were made by over 315,000 members through EPF’s app, according to recent reports.
Read Also: Guide To EPF i-Saraan Contribution For Gig Economy Workers
How Does EPF’s Self-Contribution Work?
EPF’s self-contribution option is available to Malaysian citizens and permanent residents below 75 years of age. You can make self-contributions in any amount between RM1 and RM100,000 a year.
Once you make a self-contribution, it will be credited to your EPF account in at least three to seven working days. The contributions will be credited across all three EPF accounts known as the Retirement Account, Wellbeing Account and Flexible Account.
Voluntary contributions to your EPF are irreversible, which means you can’t withdraw the funds even if you need it in the future. However, members can still make withdrawals for specific purposes such as mortgage payments, medical treatments and education.
Benefits Of Making Self-Contributions
Preparing for our retirement early allows us to leverage the power of compounding and for our savings to have enough time to grow.
For example, you earn a monthly salary of RM4,500. As an employee, you are required to contribute 11% of your monthly salary to EPF and your employer contributes 13% your salary to your EPF. So, every month, mandatory contributions of RM1,080 are credited into your EPF account. Assuming that the annual dividend is 3%, you will have RM13,348.80 in savings for that year.
Monthly mandatory contributions + Estimated Annual Dividends
(RM1,080 x 12) + (RM1,080 x 12 x 3%)
RM12,960 + RM388.80
= RM13,348.80
On top of that, if you make voluntary contributions of RM50 a month, you will get RM13,966.80 in total EPF savings for the year, which is RM618 more in EPF savings a year.
Monthly mandatory contributions + Monthly voluntary contributions + Estimated Annual Dividends
(RM1,080 x 12) + (RM50 x12) + RM406.80
= RM13,966.80
It’s not necessary to wait until we earn bigger paychecks to be able to contribute more to the EPF. With self-contributions, you can contribute your extra money to EPF and grow your savings.
Besides earning decent dividends, the government encourages voluntary self-contributions by providing tax relief on your EPF contributions for up to RM4,000 a year.
How To Make Voluntary Contributions To Your EPF
You can conveniently make self-contributions to EPF through its i-Akaun app by following the steps below.
- Step 1: Log in the i-Akaun app
- Step 2: Click ‘Increase your savings’
- Step 3: Enter contribution amount
- Step 4: Select your bank
- Step 5: Confirm contribution details
- Step 6: Log in to your online banking account and make the payment through FPX
- Step 7: Download receipt for record-keeping
You can also make manual contributions at EPF’s offices, selected banks and mobile EPF counters. For manual contributions at EPF’s offices and selected banks, you may need to prepare a copy of the self-contribution payment form, which is available on the website. At EPF’s offices, members can only make cash payments limited to RM500.
Should You Make Self-Contributions?
Since its inception in 1955, EPF has a track record of delivering guaranteed dividends of at least 2.5%.
While EPF may be a reliable avenue and it’s beneficial to bulk up your retirement savings, there are other investments and you may want to diversify your savings in investments that could potentially give you better returns or allow you to keep liquid investments.
Besides, you may also want to make sure that you’re not stretching your finances to make self-contributions to EPF and not having enough for emergencies or other immediate needs.
Read Also: Guide To EPF Account 3 Savings, And What You Should Use Them For?
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