With the restructuring, the number of accounts will be consolidated from three to two, comprising Account 1 (70 per cent of members' savings) and Account 2 (30 per cent of members' savings). Currently, there are three accounts, which are Account 1 (60 per cent of members' savings), Account 2 (30 per cent) and Account 3 (10 per cent).
The savings currently in Account 3, which are used for critical illness related withdrawals, will be incorporated into Account 2 initially. Subsequent contributions after January 2, 2007, will be channelled into Account 1 and Account 2 in the proportion of 70 per cent and 30 per cent respectively. This will result in members having a larger amount for housing, education, 50 years or medical withdrawals.
"With the changes, members will have to prioritize their pre-retirement withdrawals carefully. This is because all these withdrawals will be made from the same account, i.e. Account 2.
"The restructuring of members' accounts from three to two will bring a multitude of benefits to members in the long run in the form of increased funds for retirement and greater flexibility and control over the management of funds for their current needs," said Nik Affendi Jaafar, Senior Public Relations Manager of the EPF.
For the record, Account 1 cannot be withdrawn by members before they reach 55. However, members can invest a portion of their savings in Account 1 in investments managed by approved external fund managers.
Effective January 2, 2007, for age 55 withdrawal before the actual dividend for 2006 is announced, the EPF will pay the minimum dividend of 2.5 per cent first on the withdrawal amount. The balance will be paid when the actual rate of dividend is announced. This move is in the best interest of members as they will receive dividend payment based on the actual rate. Previously, dividend payment was paid based on the last declared rate.
The supplementary dividend payment will be credited into the members' bank accounts automatically not later than a week after the dividend is declared. Hence, members are requested to ensure that their bank accounts remain active.
In proposing these changes, the EPF has taken into consideration that retirement savings of members are depleted on an average between one and 10 years upon full withdrawals at age 55.
To support this change, the EPF's current IT system will be replaced by a newer IT structure. As a result of this, members who have made application for withdrawals in the month of December 2006 will face a slight delay in their application process.
However, this is only temporary and these withdrawal applications are expected to be cleared before the end of January 2007.
"We appeal to members' patience and understanding while we upgrade our IT system as this is done with their best interests in mind," Nik Affendi said.
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