How To Withdraw From EPF Under i-Sinar
More than two million Malaysians will be able to apply to withdraw funds from Employee Provident Fund (EPF) Account 1 from next month under the EPF i-Sinar program. The idea is that it will help those who have been affected by the protracted pandemic to make ends meet.
However, it is important to note that this is not a withdrawal. The EPF considers this to be an advance on your future pension benefits and expects you to replace the funds you have received.
If it’s something you think you need, here’s how it works.
How much can you get?
Typically you have access to 10% of the total savings in your account 1 – as long as you maintain a minimum balance of RM100. However, the actual amount is determined by how much you actually have in your account.
Your advance will be spread over a period of six months, with the first amount credited to your bank account at the end of the month following your request. For example, if you apply for i-Sinar in December 2020, you will receive the first advance at the end of January 2021
You will also have the option of loading your withdrawals in advance by taking a larger lump sum at the start. The amount you can withdraw in your first month also depends on your savings. Here is an example of how it works:
(up to RM 60,000)
Who is eligible?
EPF i-Sinar applies to contributors who have:
- have lost their jobs;
- have been placed on unpaid leave;
- or have no other source of income.
This situation must have occurred due to the COVID-19 pandemic and subsequent movement control orders.
When can you start?
Applications for EPF i-Sinar will start in December 2020.
Do you have to pay it back?
In a way, yes. While you don’t have to repay the money directly, it will affect your future contributions to the EPF. What happens is that 100% of your future contributions will be deposited into Account 1 until you replace the amount you received under i-Sinar (as opposed to only 70% being deposited into the account 1 and the rest 30% going to account 2).
The effect of this is that you can have less in your Account 2 in the long run. This can impact you if you plan to make withdrawals for education or buy a home in the future.
You should also note that the minimum EPF contribution for 2021 is reduced to 9% as part of the recent 2021 budget proposal. This means that you will return significantly less than the previous contribution of 11%, in addition to the contribution rate of 7% which was introduced from April to December 2020.
Should you take the i-Sinar advance?
If you have lost your job and are struggling not only to pay the bills but also at the risk of losing your home or losing your insurance coverage, then this is definitely something you should consider. After all, your future is a little less important than surviving the present. That said, you need to carefully consider how much you need and avoid withdrawing too much money from your EPF account (because you are going to be replacing it).
However, if you have emergency savings (which we recommend), it is best to avoid touching your EPF funds. These savings are meant for times like this, and you shouldn’t hesitate to use them first.
In this case, it is more important to leave your EPF funds alone if you can afford it. Emergency savings are for emergencies like now, ETH money is savings for your future retirement (and your future will thank you for it).
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