In recent years, Malaysians are struggling to cope with inflation due to the high cost of living and lesser savings.
In light of this situation, the Employees Provident Fund (EPF) is now looking to help alleviate the burden by implementing the Flexible Account, better known as Account 3, which was first introduced during the tabling of Budget 2024 last year.
What is the purpose of EPF Account 3?
In contrast to Account 1 and Account 2, where withdrawals are restricted to retirement and specified needs such as education, healthcare, housing, and early withdrawals at age 50, Account 3 offers a different approach.
The purpose of Account 3 is to allow Malaysians to withdraw funds from their savings anytime regardless of age and to help them financially sustain themselves before reaching the retirement age.
According to NST, monthly contributions will be split into three: 75% into Account 1, 15% into Account 2 and 10% into Account 3. As of now, the allocation currently stands at 70% for Account 1 and 30% for Account 2.
However, the one downside of Account 3 is that it will have lower returns than in Accounts 1 and 2.
Why this new initiative?
NST further reported that Account 3 was introduced following four Covid-19 pandemic-related withdrawal programs, which saw RM145billion being drained from EPF.
In July 2023, then EPF Chief Strategy Officer, Nurhisham Hussein, explained that the creation of Account 3 was aimed at addressing the urgent cash needs of Malaysians and to attract contributions from those in the informal sector.
While no formal announcement has been made just yet, NST reported that 10% of monthly contributions from May onwards will be channeled into Account 3 while existing funds in Accounts 1 and 2 will remain the same.
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