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Article written by Tarsha
Written by Tarsha

Last modified on April 14th, 2024

Overview

The Employees’ Provident Fund (known by its acronym EPF, or KWSP in Malay) is a Malaysian government agency that manages a compulsory savings plan and retirement planning for private and non-pensionable public sector employees.

The EPF functions through monthly contributions from employees and their employers towards saving accounts. While in savings these funds may be used in various investments by the EPF or, in some cases, by the members themselves.

Benefits

There are several benefits to contributing to the EPF, namely:

The EPF, by law, has a minimum dividend rate of 2.5%, but historically has had a much higher rate. For example, in 2014, the dividend rate was 6.75%.

Your EPF contributions are tax-free up to a maximum of RM4,000 per annum, since they are deducted from your chargeable income for calculation of income tax.

Withdrawal

At the age of 50, Malaysian citizens and permanent residents are allowed to withdraw up to 30% of their savings, and at the age of 55 they can withdraw their full savings.

A full withdrawal can also be made in the event that an EPF member emigrates or becomes disabled.

Foreigners who opt to contribute to the EPF may withdraw their funds when they have terminated their employment and are about to leave the country.

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FAQs

Some frequently asked questions...

The Employees’ Provident Fund (EPF), or KWSP in Malay, is a governmental organisation responsible for overseeing a mandatory savings program and retirement planning for private and non-pensionable public sector workers.

This involves monthly contributions from both employees and their employers into savings accounts. These funds can be utilised for diverse investments either managed by the EPF or, in certain instances, by the members themselves.

Contributing to the EPF has various advantages, including:

  • The EPF being mandated to provide a minimum dividend rate of 2.5% by law, although historically, it has often exceeded this minimum rate. For instance, in 2014, the dividend rate reached 6.75%.
  • Employee contributions are tax-deductible up to RM4,000 per year, with an additional tax deduction of up to RM3,000 for voluntary contributions. Employer contributions up to 19% are also tax exempt. 

The EPF, by law, has a minimum dividend rate of 2.5%. 

Historically, the EPF has often declared dividend rates higher than the minimum, like in 2014 when the dividend rate was 6.75%.

Yes, employee contributions are tax-deductible up to RM4,000 per year, with an additional tax deduction of up to RM3,000 for voluntary contributions. Employer contributions up to 19% are also tax exempt.

At the age of 50, Malaysians and permanent residents are allowed to withdraw up to 30% of their EPF savings, and at the age of 55, they can withdraw their full savings. 

A full withdrawal is also permitted in the event of emigration, disability, or termination of employment for foreigners contributing to the EPF.

Yes, KWSP is the Malay acronym for Kumpulan Wang Simpanan Pekerja, and it is synonymous with EPF which stands for the Employees’ Provident Fund.

It functions as a retirement fund established as a federal statutory body under the management of the Ministry of Finance in Malaysia.

The EPF operates by collecting monthly contributions from both employees and their employers, directing these funds into savings accounts.

SOCSO (Social Security Organization), also known as PERKESO (Pertubuhan Keselamatan Sosial), is a Malaysian governmental body established under the Employees’ Social Security Act 1969 to provide comprehensive social security coverage for employees.

The EPF (Employees Provident Fund), also know as KWSP (Kumpulan Wang Simpanan Pekerja) in Malay, is a different statutory body that manages a mandatory savings program and retirement strategy for employees in the private and non-pensionable public sectors.

While EPF’s primary focus is on savings and retirement funding, SOCSO has a more extensive mandate covering various aspects such as accidents, injuries, physical and vocational rehabilitation, loss of employment, job seekers, placements, as well as upskilling and reskilling.

The EPF contribution deducted from the employee’s salary is around 11% of the wages subject to EPF contribution for employees below the age of 60. Employers should refer to the EPF table for the contribution amounts based on the specific salary range. Employers also contribute at around 13% of the employee’s wages subject to EPF for wages up to RM5,000 and 12% for wages above RM5,000. Employers cannot deduct their part from the employee’s salary. Learn more about EPF contribution rates.

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