Contribute at least 20 per cent to Account 3 – Economist

24 Oct 2023 09:51am
Photo for illustrative purposes only = 123RF
Photo for illustrative purposes only = 123RF

SHAH ALAM - The government's move to create a Flexible Account or Account 3 to replace the implementation of targeted withdrawals from the Employees' Provident Fund (EPF) can be used as an emergency fund for the people in case of unforeseen situations like before.

Universiti Sains Islam Malaysia Economics and Muamalat Faculty Islamic Banking and Finance Lecturer, Dr Mohd Faisol Ibrahim said this was because the new account could be accessed by all members regardless of income category.

"The benefit of this Flexible Account is that it is considered an emergency fund for all parties who are in need of money for the purpose of increasingly challenging lifestyles.

"This is because every contributor regardless of whether they are B40, M40 or T20 cannot escape from the obstacle of life which sometimes requires a certain amount of money for certain purposes," he told Sinar.

Dr Mohd Faisol Ibrahim. - FILE PIX
Dr Mohd Faisol Ibrahim. - FILE PIX

He said this when asked to comment on the government's decision to discontinue the implementation of EPF targeted withdrawals and instead provide the fund's Flexible Account service beginning next year.

Faisol said that the action would also stop contributors from misusing targeted EPF withdrawals, particularly for non-urgent needs.

Related Articles:

In fact, he said, the action could save contributors' Accounts 1 and 2, and prevent them from being compromised before their retirement.

Faisol made several suggestions when questioned about the best approach to create Account 3, including beginning from zero and taking a specific proportion from Accounts 1 and 2.

"When this Flexible Account is established, it is possible that some percentage of the contributions from the existing Accounts 1 and 2 can be put into this new account.

"Another suggestion is that 10 to 20 per cent of the total EPF contribution percentage each month will be included as a contribution in the Flexible Account," he said.

For now, 70 per cent of employee contributions are put into Account 1 while the other 30 per cent goes into Account 2.

Faisol pointed out that if the government decided to start the contribution for the account at zero, it would definitely give a void to the contributors who were desperate to get financial resources in the immediate period.

"If the contribution starts at zero, surely the withdrawal will only occur in the upcoming years because the contribution in this account is still zero.

"This somewhat inhibits the hopes of some groups, especially B40 and M40 who need production for desperate and emergencies," he said.

He added that the existence of the Flexible Account also needed to have a strong justification so that the process of withdrawal of contributions was not arbitrarily made and approved so easily to contributors which would eventually trap the EPF members themselves, especially when they retire.