EPF Account 3: What Exactly It Is And How It Is Likely To Work

10% of your future monthly contributions will go into Account 3.

Cover image via Ministry of Finance

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The Employees Provident Fund (EPF) is expected to announce details about its much-awaited Flexible Account, also known as Account 3, which was first introduced during the tabling of Budget 2024 last year

According to EPF, they are finalising the Account Restructuring mechanism.

"EPF is on a set timeline and will announce the details of the account restructuring initiative before the end of April 2024," it said recently.

Earlier in February, Finance Minister II Datuk Seri Amir Hamzah Azizan told the Dewan Rakyat that EPF will also clarify how money can be withdrawn and explain the division mechanism of Account 3.

So, what exactly is Account 3?

Think of it like a savings account, but optional.

This new optional savings account is within EPF, and contributors can withdraw money from Account 3 anytime, like a regular savings account.

The idea behind Account 3 is to give people more control over their retirement savings and access to emergency funds, as well as to attract more people from the informal sector to contribute to EPF.

One of the potential downsides is that money kept in Account 3 will earn lower returns than in Accounts 1 and 2.

For context, Accounts 1 and 2 are the pension fund's existing retirement savings accounts for members. While Account 1 comprises 70% of members' savings, Account 2 comprises the other 30% for discretionary withdrawals.

How will Account 3 likely work?

While details have not yet been officially confirmed, the New Straits Times reported that starting from May, 10% of your future monthly contributions will go into Account 3.

With the introduction of Account 3, the restructured system will see monthly contributions split three ways: 75% into Account 1, 15% into Account 2, and 10% into Account 3.

Money in the existing Accounts 1 and 2 won't be affected, meaning Account 3 will start with zero balance.

One potential benefit that members can avail of is that they can choose to transfer funds from Account 3 to Accounts 1 or 2 for potentially higher returns, reported the English daily.

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