EPF withdrawal for unit trust investment? +13 Other Ways…

To ease EPF Members like you in preparing for a sustainable retirement,

Malaysia’s Employees Provident Fund (EPF or KWSP) allows you to make a partial withdrawal from your  retirement savings

The reason?

To meet the specific pre-retirement-related needs that comply with EPF’s withdrawal policies from time to time.

Choose the type of EPF withdrawal below which pique your interest ↴

EPF Withdrawal for Unit Trust Investment

EPF has announced the removal of its 30% foreign fund exposure cap on Members Investment Scheme (MIS) commencing August 1 2016, permitting members to withdraw and invest in unit-trust funds that are focused on overseas investments.

 

(note: see Part 2 HERE because not able to fit into 1 info-graphic)

EPF unit trust investment

That means some, but not all of the existing foreign-exposed unit trusts from multiple fund management companies have been approved for the MIS under the new amendment.

The foreign funds exposure threshold was liberalized to allow for asset diversification.

EPF unit trust investment – no change in withdrawal rules

No changes in terms & conditions for current rules of EPF unit trust investment under this new amendment. Withdrawal of EPF Acccount 1 for unit trust investment can be done on a quarterly basis – not more than 20% of savings in excess of the Basic Savings amount in Account 1. Investments under the MIS are on a voluntary basis, and provide members with another avenue to enhance their retirement savings.

EPF unit trust investment – informed risk-aware diversification

All this while, all EPF approved investments are only in locally-exposed funds. Therefore, the cap removal is a great move to allow members to reduce geographical concentration risks.

It also means reducing your investment portfolio correlation to the local stocks market. We know that there is not really a good move to use EPF Account 1 to invest into fixed income EPF funds, because leaving it in EPF would generate similar returns at lower costs. So most people sensibly into into equity funds.

EPF unit trust investment – i-Invest online platform to D.I.Y. (do it yourself)

Starting in Aug 2019, no more filling hard copy forms and no more thumb printing KWSP 9N forms!

Eligible Employees Provident Fund (EPF) contributers can now make informed investment in unit trust funds offered by EPF approved Fund Management Institutions (FMIs), via the self-service i-Invest online platform within the i-Akaun (Member) portal.

epf unit trust investment i-invest

“We are very excited about introducing i-Invest, as this digitally powered facility empowers our members to take control of their investments and make transactions at nearly zero cost,” said EPF Chief Executive Officer Tunku Alizakri Alias in a launch statement.

About i-Invest:

  • First pension fund anywhere globally to directly link members’ retirement funds to online investment services.
  • Front-load cost is nearly negligible as the EPF has mandated a maximum cap of 0.5% compared to the current 3% for offline and traditional transactions through unit trust agents or bank intermediaries.
  • i-Invest platform is equipped with tools to independently compare financial information to ensure right selection of unit trust funds that suit members’ savings goals.
  • EPF members can monitor their investment funds performance inside their i-Akaun, and screen the historical annual performance.
  • EPF members are empowered to transfer from their EPF Account 1 up to 30% of the amount in excess of Basic Retirement Savings, to be invested in the EPF approved funds.
  • EPF members can also open an account to invest in unit trust funds with any FMI using this new facility.

There is this one gnawing problem with EPF unit trust investment…

Members may only invest in one unit trust fund house at a time, thus diversification is “slow” and not optimal.

It would be great if EPF can allow members to invest in multiple fund houses in one go, rather than just one and wait for a certain amount of time before investing in another.

For example, if you want to invest in say, global equities, we could draw RM10,000 to invest in five different unit trust funds from five different fund houses, exposed to foreign equities  at a time, it would give me better diversification immediately.

Note: please allow 30 seconds for the info graphic below to load fully

Top in 2016

  1. Affin Hwang Select Asia (Ex Japan) Quantum Fund : 12.02%
  2. Eastspring Investments Global Leaders MY Funds : 11.40%
  3. CIMB-Principal Greater China Equity Fund : 10.60%

Top in 2015

  1. TA European Equity Fund : 24.5%
  2. CIMB Global Titans : 24.24%
  3. Eastspring Investments Global Leaders : 21.24%

Top in 2014

  1. Public Far East Select : 15.39%
  2. CIMB-Principal Greater China Equity Fund : 14.87%
  3. Affin Hwang Select AsiaPac REITS & Infrastructure : 14.22%

Top in 2013

  1. Eastspring Investments Global Leaders : 35.89%
  2. CIMB Global Titans : 34.18%
  3. TA European Equity Fund : 31.26%

Top in 2012

  1. Affin Hwang Select Asia (Ex Japan) Quantum Fund : 27.42%
  2. Affin Hwang Select Asia (Ex Japan) Opportunity Fund : 23.89%
  3. Affin Hwang Select AsiaPac (Ex Japan) REITS & Infrastructure : 20.28%

Top in 2011 (the least negative annual return)

  1. Affin Hwang Select Asia (Ex Japan) Quantum Fund : 6.17%
  2. Pheim Emerging Companies Balanced Fund : -1.82%
  3. RHB Global Allocation Fund: -3.29%

Looking at the performance track record and consistency above, which funds would you choose to invest into?

Facts on EPF own investment and EPF unit trust investment for members

EPF itself allocates less than 30% of its AUM – worth approximately 700 billion ringgit (US$171.7 billion) as at December 31, 2015 – to investments abroad.

The MIS contributes a sizeable portion to the UTF industry’s total FUM. Unaudited figures by the EPF show that as at end-2015, 820,000 EPF members have invested up to 39.3 billion ringgit in approved EPF approved unit trust funds.

Malaysia unit trust industry has a total of 667.88 billion ringgit in AUM as at end-2015, according to statistics from Securities Commission Malaysia.

Source: The EdgeMarket Daily

How to invest and consolidate your EPF-MIS investment into 1 EPF approved account for convenience using iFast platform

iFast platform is used by independent financial adviser such as us to manage clients’ investments.

What you can do if you are ‘stuck’ with an underperforming unit trust investment – EPF or cash

You can transfer to iFast platform used by independent financial adviser (such as myself), at zero costs, and subsequently move around among most of the funds (except Public Mutual) listed above – as and when needed, also at zero costs. Annual management fee applies though. Here’s a schedule for reference.

Miscellaneous useful info

  1. If you need to check the list of appointed fund management institutions for unit trust investment EPF members investment scheme, click here.
  2. If you need to check how much you can withdraw your EPF account 1 for unit trust investment now, use this EPF calculator without login into EPF website.
  3. While every effort is made to ensure the information on this is updated to the latest info from EPF, always cross check EPF website for all details on EPF members investment scheme (EPF-MIS)

Sources: TheStar, NST, iMoney

 

Other Eligible and Allowable Reasons for Partial Withdrawal of EPF Members’ Retirement Savings

EPF Withdrawal to Reduce Housing Loan Monthly Instalment

EPF understand that servicing monthly mortgage is no easy feat.

This is especially the low income earners having little savings in their bank account, plus having to cope with inflation and increasing financial commitments.

Although not recommended from financial planning perspective, but you find yourself in a tight spot, you can make a withdrawal for housing loan, from your Account II for a minimum period of six months.

EPF Withdrawal to Reduce or Redeem Housing Loan

You are eligible to withdraw for housing purposes from EPF Account 2 to reduce/redeem your outstanding housing loan amount or assist your spouse with paying off theirs.

Some salient criterion

  • Below 55 years of age
  • At least RM500 in Account 2
  • Bought/built first or second residential home (bungalow/terrace/semi-detached/apartment/condominium/studio apartment/service apartment/townhouse/SOHO) or a shop lot with a residential unit in Malaysia)
  • Registered owner of the property or fully owned by spouse/jointly owned by member & spouse (also Member’s spouse is a borrower of the housing loan)
  • Residential home has been charged as collateral
  • Have an outstanding housing loan with loan providers recognised by the EPF
  • Application can be made once a year from the last withdrawal date

EPF Withdrawal to Purchase a Home

Skyrocketing real estate property prices have made home ownership a further reach for many urban dwellers but you can always resort to your savings in EPF Account II when taking a leap from renting to buying a house to stay.

To qualify for EPF withdrawals for housing under this category, you must be:

  • Below 55 years of age
  • At least RM500 in Account 2
  • Purchasing a residential home (bungalow/terrace/semi-detached/apartment/condominium/studio apartment/service apartment/townhouse/SOHO) or a shop lot with a residential unit in Malaysia)
  • Never made a housing withdrawal/have made housing withdrawal before but have sold/disposed of the property

EPF  House Withdrawal for PR1MA Housing

EPF members are able to utilize existing and future EPF savings in Account 2 to obtain their first home under the Malaysia People’s Housing Programme (PR1MA).

For that, you must be below 55 years, a PR1MA home buyer with housing loan obtained thru Skim Pembiayaan Fleksibel PR1MA (SPEF) and have never made any Housing Withdrawal OR have made a Housing Withdrawal but have sold/disposed of the property.

The first step is to ring-fence EPF account so that your future EPF contributions will go directly to your new home, with caveats below:

  • This withdrawal is solely restricted for the financing of PR1MA homes, therefore,  monthly installments will be made directly to the financial institutions.
  • If your Account 2 balance falls below your monthly mortgage repayment, then EPF will pay the full amount in your Account 2 (subject to a minimum payment of RM50) but you may still suffer from deficit payment
  • All other type of pertial withdrawals under Account 2 will no longer be available anymore for you
  • Such restriction in place will be lifted when EPF member reaches age 55; makes a Pensionable Employees/Incapacitation/Leaving the Country Withdrawal/Death Withdrawal; or with written instruction from the financial institution.
  • If your home is foreclosed, the restrictions on your Account 2 savings will stay unless with written permission from the financial institution.
  • The EPF is not responsible for any late payments or non-payments affecting your CCRIS record due to non-contribution or the freezing of your account.
  • Upon hitting age 55 and qualifying for Retirement Withdrawal,  EPF member is accountable to settle the outstanding house loan with the financial institution for your PR1MA home.

Flexible Housing EPF Withdrawal?

Most EPF contributors are not aware that they can use their current and future EPF savings to help increase eligibility limit to qualify for higher mortgages amount from Malaysian banks.

This has to do with lowering your Debt Service Ratio.

How does this work exactly?

Well, you set aside part of the savings in your Account 2 to a Flexible Housing Withdrawal account.

When it comes to evaluating your loan eligibility and approving the final home loan amount,  a bank will consider your monthly EPF contribution as part of your income.

However, the #1 thing to understand is this:

The minimum EPF savings period is one (1) year and ring fencing can only be used for one (1) house at a time.

The maximum savings period is up to age 55, or subject to the date of your last housing loan or last day of ring fencing (whichever is earlier).

Besides that, the savings in this Flexible Housing Withdrawal account…

  • cannot be utilized anymore for Housing, Education, Health and Age 50 Withdrawal.
  • your Account 2 can still be used for Housing, Education, Health and Age 50 Withdrawal.
  • money you’ve set aside into Flexible Housing Withdrawal account still belongs to you, and will not be assigned to banks.
  • will still be subject to the annual EPF dividend but it will flow to your Account 2

EPF Withdrawal to Treat Critical Illness?

Medical inflation in Malaysia is estimated at 10% to 15% per year, so it’s not surprising that healthcare is never going to be inexpensive.

The silver lining is that EPF allows members who are stricken by long term serious medical problems to make a withdrawal from their Account II to help cover their medical bills (anything falls under the category of alternative treatment is excluded though).

You can even assist your spouse, children, parents (biological, adopted, step, in laws) and biological siblings using your EPF account II.

(in case you’re not aware, you can be eligible to claim substantial tax relief from LHDN for this as well)

You can use this health withdrawal as a last resort when medical expenses incurred are not fully covered by your employer.

For up to date details on the approved illnesses and healthcare treatment, medication or equipment approved by EPF, head over to EPF official page on this matter. 

EPF Education Withdrawal to Fund your Education

Although it is a controversial statement to blindly assume higher education alone is the key to a successful life or career nowadays, withdrawing your EPF Account II to pursue higher education is allowed by KWSP.

The best thing?

You can expand your withdrawal limit to your children.

But you can only do so if you or your children study at local universities approved by EPF – be it academic/professional/skill-based/vocational study courses ~ full time, part time, distance learning or franchise programs.

For overseas institute of higher learning, only full time programs are allowed.

You can literally use up your EPF Account 2 to cover for the entire tuition fees or outstanding education loan OR just to cover part of it (whichever is lower).

You can even do multiple withdrawals, though not at the same time.

In other words, you are able to withdraw from EPF money and use the withdrawn EPF amount to cover:

  • Tuition fees and charges imposed by the higher learning institution
  • Outstanding study loans
  • Hostel & Accommodation Fees
  • One-way flight for first-year students studying outstation/abroad

Hajj Withdrawal Allowed by EPF

This requires no further explanation.

For the longest time, Muslim members planning to perform hajj can utilize your savings from EPF Account 2 to supplement your savings at Lembaga Tabung Haji (LTH) for hajj expenses.

You can’t just withdraw any amount though.

To be eligible for this, you must be:

  • Selected for hajj by LTH
  • Have never applied for hajj withdrawal
  • Insufficient savings in your Tabung Haji

RM 1 mllion Withdrawal

If you have RM 1 million savings in your EPF Account 1 and 2….

Then this applies to you (lucky bastard).

EPF allows members with more than RM1 million in savings the flexibility to withdraw and manage excess savings on your own.

Here’s a quick money tip:

It would be a fool if you withdraw the excess RM 1 million amount and put them into fixed deposits…don’t you agree?

So don’t.

Other Eligible and Allowable Reasons for Full Withdrawal of EPF Members’ Retirement Savings

Pensionable Employees Withdrawal

Public sector employees can make a one-time withdrawal of your share of EPF contributions before age 55, upon granted of Pensionable Employee status.

You Can Withdraw the balance of EPF Savings after segregation government share.

Note:

Pensionable employee is defined as an employee who has been emplaced in the under any written law affecting the emplacement of employees in the appropriate pensionable establishment by the Government of Malaysia or of any State or by any statutory or local authority.
Beginning 1 January 2018, public sector employees who have made a Pensionable Employee/Optional Retirement Withdrawal are required to continue contributing to the EPF in line with the Portability Scheme (Skim Kebolehalihan)

Incapacitation Withdrawal

EPF’s Incapacitation Withdrawal enables you to withdraw all of your EPF savings should your condition prevents you from working or supporting yourself financially.

In addition, eligible members will be given RM5,000 as an Incapacitation Benefit to help ease your burden.

To fall under the category of incapacitated, you must be:

  • Unemployed
  • Certified physically or mentally incapacitated by a medical practitioner

You must be assessed by the EPF medical board.

And EPF has the final decision to verify all medical reports that have been submitted with the relevant medical institutions.
In the event that EPF medical board deems the member is incapable of managing themselves or their finances, the payment can be made to any next of kin deemed fit by the EPF.

Leaving Country Withdrawal

If you’re a Malaysian who intend to leave the country and cut your ties, you can actually liquidate your entire EPF savings.

With that, it means you have given up your Malaysian citizenship to migrate to another country.

If you are an expatriate or a Permanent Resident (PR)or foreign worker returning to your home country, can choose also opt to withdraw all of your EPF savings.

Retirement Withdrawal

When you reach age of 55, EPF contributions made to your Account 1 and Account 2 will be consolidated into Account 55.

You can withdraw all or part of the savings from this account at any time.

Should you choose to continue working after the age of 55, all further EPF contributions made following statutory rate will be credited in your Akaun Emas, to be withdrawn only upon reaching age 60. With a decent dividend rate distributed by EPF over the years, it does make sense to keep most of your EPF monies inside EPF itself to further enjoy the compounding return.

This Post Has 9 Comments

  1. moot

    @Liew

    Watch out for unit trust COST and its Price Earning. If the PE dividend is f*ck up, stop the sinking cost mentality and switch the funds with better PE. Or just dump it to cut all your loses. I am not sure whether you have added the 5.5% cost into your unit trust cost or not, the unit trust only pays you 0.005 dividend, 0.2506 /0.005 = 50.12 PE value. I.e. it will take MORE than 50 YEARS for you to recover your capital. Betting on the unit trust value growth with the market is WORST than investing in a stock or keep in inside EPF. Because a $1000 in EPF will not deduct 1.65% fees and it WILL NOT FALLS in value. While in unit trust, there are many things to beat : 1.65 management fees, falls in value, falls in dividends. All these will widen loses gap compare to EPF.

    1. CF Lieu

      moot, thank you for your comments. Do you know now that you can use EPF platform itself to totally remove the 5.5% cost (upfront sales charge)?

  2. Liew

    My unit trust agent (left after one month I bought the mutual fund). She said, as long as I keep my public mutual small cap growth fund as long as possible, I will definitely be able to gain profit. I bought at 0.2506, since then it drops till today 0.2343.

    That’s my retirement fund n the only saving I have because I am a housewife.

    I am not able to generate income.

    I am so worry that I will never able to recover back my investment, at least( n have not included the high cost of management fees yet ).

    I think I have gone into depression again due to too much worries.

    1. CF Lieu

      Hi Liew, sorry to hear about your predicament, but what is your question?

  3. Yong Kock Fun

    Hi CF,

    It is interesting in reading your article. As i have recently very upset and disappointed with my Unit Trust performance using my EPF money. i have noticed all my funds are averaging of 1% to 1.5% return after interesting in mutual funds more than 4 years. some of the accounts are even losing money since 2009 until now.

    So my questions is EPF giving us an averaging of 6% annually and mutual funds giving us averaging 1% to 2%, why should we invest in mutual instead?

    PUBLIC MUTUAL FUNDS (AS OF 5/12/17)

    NO FUND TYPE “DATE
    COMMENCEMENT” “INVESTED
    AMOUNT” “CURRENT VALUE
    5/12/17” YEARS
    1 PUBLIC DIVIDEND SELECT FUND EPF 11-03-13 12,589.00 13,152.86 563.86 4.48% 4
    2 PUBLIC GLOBAL SELECT FUND EPF 21-12-16 4,000.00 4,164.57 164.57 4.11% 1
    3 PUBLIC REGULAR SAVINGS FUND EPF 14-05-12 41,339.00 48,167.76 6,828.76 16.52% 5
    4 PUBLIC FAR EAST SELECT FUND CASH 08-04-10 9,000.00 15,420.96 6,420.96 71.34% 7
    5 PUBLIC WORLDWIDE EQUITY CASH 26-12-09 4,000.00 3,632.40 (367.60) -9.19% 8

    These are some of my funds performance. What should i do? Should i just cancelled all my mutual funds are reversed the fund to my own EPF account since the EPF is giving us 6% rather than 1-2% return.

  4. Ameen

    Hi CF,

    Are you sure that one can only invest in one unit trust fund in one go? Because my UT agent always allocate for each withdrawal into 2-3 funds but still under the same fund management company. E.g. withdrawal amount RM10,000 allocated into fund A RM3,000, Fund B RM3,000 Fund C RM4,000.

    1. ChingFoo Lieu

      Hi Ammen, what I meant was invest into different funds from different fund management companies. Edited the article above for clarity. Thanks for dropping by and your comments!

  5. K S

    CF,

    Looking at the yearly performance tables of the funds under the EPF-MIS, it is disheartening to note that no fund has consistently appeared in the Top Three for consecutive years. Maybe if there is a Top Ten listing, maybe we can find some funds that are in the Top Ten over the years. As you no doubt agree, investing in funds under the EPF-MIS is to allow investors to try to find a fund that can provide consistent out-performance compared to EPF. Investors should not need to keep moving their investments around seeking performing funds to invest in.

    IMHO the need to rebalance investments should be used only for cash investments rather than EPF-MIS investments.

    Your thoughts on the above is greatly appreciated.

    1. ChingFoo Lieu

      Hi boss,

      I agree that frequent rebalancing makes little sense for EPF investment because once invested, it is neither ‘flexible’ nor ‘mobile’, except switching to other funds within the fund management company’s products. However, in practical scenarios, what will do is – if a client was invested into an underperforming funds from say, Fund House A, long time ago with another agent, I would offer him a 0% moving cost to restructure his portfolio by investing into whichever funds which we deem will continue to perform above average going forward. On the same note, if the verdict is to change to a different fund from a different fund house, then I’ll do a no-cost switch for client. Although it is a hassle in terms of paperwork and procedure (the invested EPF amount need to go back to EPF account 1, then out again at 0% charge), it can be done as last resort to cut underperformers.

      I think it is a bit unrealistic to expect a fund to perform top 3 in its category among its peers for more than 3 years; there are so many variables at play, including the fund’s investment team.

      And while I do not possess 10 years data (some funds may not even exist yet), a Top 10 funds for the past 5 years may be more viable. Already compiled it over here – http://askcf.com/epf-foreign-fund-return-table/ so check it out.

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