The Employees Providend Fund (EPF) Account 2 and 1 can be entirely withdrawn at age 50 and 55, respectively.
In Singapore, it's Central Providend Fund (CPF) requires a minimum sum (currently S$123,000 (RM292,995) and a Medisave Required Amount (MRA) to be set aside at age 55, for those who meet the requirements.
The minimum sum pays a monthly life annuity from age 65 for as long as one lives, and the Medisave Required Amount can be used for approved medical expenses and insurance premiums.
Defer EPF withdrawal?
Some Malaysiakini readers posted in the comments of some of my previous weekly articles, that some EPF members may spend all their EPF after withdrawal at 55, in just a few years. Thus, arguing that Singapore's system may be better.
So, it got me thinking as to whether Malaysia should consider deferring a portion of EPF withdrawals like Singapore.
On the other hand, it is perhaps ironic, that some Singaporeans are always complaining that EPF is better than CPF, because everything can be withdrawn.
This may often be the case, for those Singaporeans and Malaysian permanent residents (PRs), who may be in financial difficulty, getting a job or earning enough, from age 55 to 65.
Latest CPF policy changes
The CPF announced changes in December 2010, that will also affect Malaysian permanent residents in Singapore, as they also contribute the same 35 percent of total wages to the CPF like Singaporeans.
The Medisave Required Amount will be raised from S$22,500 (RM53,597) to S$27,500 (RM65,507), from Jan 1, 2011.
This is an increase of about 22 percent.
According to the CPF board’s web site, “after adjusting for inflation, the Required Amount (MRA) will increase by S$2,500 (RM5,955, in 2003 dollars) each year until it reaches S$25,000 (RM59,550, in 2003 dollars) on 1 January 2013”.
Since inflation for the year (2010) is only expected to be about three percent, why is the MRA increase about 22 percent?
What this MRA increase means is that for example, if a Malaysian PR CPF account holder has S$150,500 (RM358,502) in his or her CPF Ordinary and Special accounts, but zero in the Medisave account, he or she can only withdraw S$24,600 (RM58,599), 20 percent withdrawal rule from 1 January, 2011 on current minimum sum of S$123,000 (RM292,995), at age 55, regardless of any available property pledge for the minimum sum.
So, Malaysian PRs may like to take into account the above changes in their retirement planning.
Investing: EPF vs CPF
EPF members can invest not more than 20 percent of their credit in excess of Basic Savings in Account 1 in products through approved external fund managers.
In contrast, Singapore's CPF members can invest the Ordinary Account's excess of S$20,000 (RM47,641), entirely in a wide range of investments, including higher risk Singapore stocks.
To illustrate the difference with an example:
EPF age 45 of RM100,000 can only invest RM7,200 (20 percent excess of Basic Savings RM64,000)
CPF any age of S$100,000 can invest S$80,000 (excess of S$20,000)
Housing: EPF vs CPF
Only EPF Account 2 can be used to purchase only one house.
The entire CPF Ordinary Account can be used to purchase more than one house.
Since EPF Account 2 is only 30 percent of the total contribution, against 66 percent of total contribution for the CPF Ordinary Account, Singaporeans may generally be able to use a greater portion of their pension fund for housing.
This is the primary reason why many Singaporeans and Malaysian PRs retire with very little CPF, because most of it may have gone to housing, given that Singapore has the highest public housing prices in the world.
LEONG SZE HIAN's late father moved from Kuala Lumpur to Singapore in 1952. Since he was born in Singapore in 1953, there may be some confusion as to whether he was conceived in Malaysia or Singapore.
