What CAN You Do With Your EPF Savings?

Do you know the rights you have over the retirement money you save in your EPF account? CompareHero.my spoke to Puan Balqais Yusoff, Head of Strategy Management Department in EPF to help answer some of the common questions we have. She also shared key rights and responsibilities you need to know to make wiser decisions for your future and prepare for a better retirement, including withdrawals from Akaun 2.

What Can You Withdraw Your EPF Savings For?

You may have heard about people taking out their EPF savings before their retirement, but before you plan on doing the same here are some important points you should know.

Firstly, Puan Balqais shares that EPF allows their members to withdraw from their savings for purposes which EPF believes will improve retirement life of their members, which includes housing; education; and for medical purposes. There are also different withdrawal rights according to the various EPF accounts – Akaun 1 and Akaun 2.

EPF allows full withdrawal of Akaun 1 and Akaun 2 under certain conditions:

• When a person migrate to another country
• Upon a person becoming disable, or in the event of death.
• A civil servant placed under the pension scheme. This individual can cease to contribute to the EPF because they are entitled for the government pension scheme under KWAP.

Akaun 1 – off limits until you retire!

This is the main account for your retirement needs and makes up 70% of your EPF savings. Money from this account can only be taken out upon retirement. Throughout our working life, there is a basic savings amount that EPF has determined is required for each age group. To see the amount of savings you should have at your current age, click here.

Based on that chart, if you have an excess of money, that is you have saved more than your Basic Savings for your current age, you can actually invest your money in EPF approved fund management institutions. Currently, you can utilise 20% of your excess savings for investment, but as of 1 January 2017, you will be allowed to utilise 30% of your excess savings.

Let’s say you’re 30, according to the basic savings set by EPF you should have at least RM29,000. You have RM40,000 in Akaun 1, which means you have RM11,000 in excess. You can then invest 30% (as of 1 January 2017) from the excess of RM11,000 which amounts to RM3,300 into fund management which has institutions which has been approved by EPF.

“If an EPF member does not reach the basic saving requirement, they cannot utilize the money from Akaun 1 to invest in unit trusts”, said Puan Balqais.

Akaun 2

30% of your total EPF savings will be in this account, from which you can make pre-retirement withdrawals for purposes stated above, including housing, education and medical.

“EPF allows pre-retirement withdrawals which in a way enhance the retirement wellbeing of our members. Savings in Account 2 can be withdrawn under specific conditions.” – Puan Balqais

Puan Balqais shares that EPF members can withdraw savings from Akaun 2 for the following purposes:

• Housing withdrawal, as this allows a member to have a roof over their head when they retire.
• Education withdrawal. Members can withdraw for themselves or their children, because EPF believes with better education they have the opportunities for a better livelihood in the future.
• Medical withdrawal. For members who have to pay for medical treatment of critical illness, they can withdraw for themselves or their close family members. Health is wealth.
• Age 50 withdrawal. A member can withdraw the full amount from their Akaun 2 when they turn 50. Nevertheless it is encouraged that members do not withdraw their savings in Akaun 2 at age 50, because once they withdraw it entirely, it’s gone and they do not earn their annual dividends.
• Haj withdrawal. Haj withdrawals helps members finance basic expenses of the Haj with a limit of RM3,000.

Akaun 55

Upon reaching age 55, your savings in Akaun 1 and Akaun 2 will be combined and put into this account. When members turn 55, they can make withdrawals and have access to savings in Akaun 55 anytime. They can perform a lump sum withdrawal, monthly withdrawals or partial withdrawal. But members should also know that “as long as an individual still has savings in EPF even upon reaching age 55, they will still enjoy the annual dividend” said Puan Balqais.

Akaun Emas

This is an account for EPF members who continue to work beyond the age of 55. Monthly contributions between the age of 55 – 60 will be allocated under this account. Member’s cannot access savings in Akaun Emas until they reach age 60. But savings under Akaun 55 will still be accessible to members. Upon reaching 60, all savings will be consolidated into this single account. They will then have full access to the savings in Akaun Emas to make full withdrawals, or even partial withdrawals.

What Extra Benefits Do You Get From EPF?

Individuals who contribute to EPF will have access to certain benefits where they or their family will receive a sum of money if an unfortunate event happens to them before they turn 55.

• RM2,500 as token of sympathy given to next of kin in the event of the member’s death

NOTE: Application must be made within 6 months from the date of death of the EPF member by their next of kin.

• RM5,000 as token of sympathy if a member becomes incapacitated (on top of being able to withdraw all of their EPF money in full)

NOTE: Application must be made within 1 year from the incapacitation case of the member.

However, all of these benefits are no longer available once a member turns 55. In the event of death or incapacitation after that age, members will no longer have the right to receive the death or incapacitation assistance.

You might wonder, does EPF use our monthly contributions to pay out these tokens or aid? Puan Balqais assures us that this isn’t the case. Money for these benefits are sourced from EPF investments income, so don’t worry it does not come from member’s and their employers contribution.

“From our investments, EPF generates income, and the entire income is distributed as dividends after deducting all the administrative cost including the payment of these assistance.” shares Puan Balqais.

Who Has The Right To Your EPF Savings? 

Do you know what will happen to your money in your EPF account in the case of an unfortunate event, such as death? You have the right to nominate your beneficiary, so if you haven’t done so we highly suggest to get on it.

Make sure the rights of your loved ones are taken care of by nominating any individuals for your EPF savings. This is a right given to you as you get to choose who you believe will handle your money in a proper manner if anything happens to you.

Before you nominate, know this:

1. Members can nominate any natural person, meaning a human as a beneficiary. For Muslims they must nominate an administrator or wasi who will act as an intermediate person that will distribute their asset in EPF based on the faraid As for non-Muslims they can nominate anyone where percentage entitled for the savings can be allocated for the individuals they nominate.
2. Nomination must be of an individual, so you cannot name an organization, association, societies or any type of entities. Puan Balqais advises all of us to nominate their next of kin such as their spouse, children or parents to receive or administrate their savings.

“Members can nominate other individuals who are not their next of kin as beneficiary or administrator (for Muslims), but naming individuals other than next of kin may raise difficulties in the future when they pass on especially the flow of the money as there will always be a lot of dispute with money matters.” – Puan Balqais

As of 1 January 2017, the process is made even easier as you no longer need to have a witness when nominating an individual. Just walk into any EPF branch and bring your identification with you.

Are There Different Rights Between the Conventional EPF Savings and Simpanan Shariah?

“The 2.5% of minimum guaranteed dividend return which applies to the conventional scheme does not apply to Simpanan Shariah. This is because under Shariah principle EPF is not allowed to make any promise of the gains.” – Puan Balqais

If you have switched, or are planning to switch, to the recently announced Simpanan Shariah, you’ll be happy to note that there are no loss of rights. However, there is a difference in terms of the minimum guaranteed dividend returns.

But don’t worry, if you have opted for Simpanan Shariah, EPF will not create capital depreciation. This means in the event that EPF makes losses, your savings will not incur loss. For example, you currently have savings of RM20,000 in Simpanan Shariah which will then be invested by EPF. In the event that EPF makes losses, you will not incur that loss and will still have the RM20,000.

Once you go to Shariah, you cannot go back

Another point to take note is once you convert your savings from conventional to the Simpanan Shariah scheme, you cannot switch back to conventional scheme.

“Once the money is being tainted and you take it back and forth (between the two different schemes) we cannot ensure the money is being properly cleansed according to the Shariah principle. You will be mixing the funds that you invest because you will be investing in non-Shariah compliant assets. This is why we can’t allow people to switch back and forth between the schemes.”  – Puan Balqais

Do you get taxed on your EPF contributions?

There are tax relief from the government depending on what has been announced in the Budget. Right now, members receive a RM6,000 tax relief for life insurance premium and EPF contributions combined. As for the employer contributions, they are tax free.

This means your contribution as an employee will be taxed according to your income bracket and the tax relief you get. As the gross income of an employee, including the employee’s portion of EPF contributions are taxed based on the income bracket set by the Inland Revenue Board of Malaysia, members can claim the amount contributed through the tax relief mentioned above.

For self-employed individuals who contributes to EPF, the tax relief they will get is also RM6,000.

EPF is more than just a retirement fund, they aim to prepare Malaysians for a better future

 “We are beyond looking at your retirement savings. We want to be an institution that helps you grow and enables you to enjoy a secure retirement. We want to be at the heart and mind of the members. We hope Malaysians will look at retirement from a different context whereby, they recognize the need to start planning now.”

Puan Balqais also ensures us that EPF’s duty is to their members. With their FREE Retirement Advisory Services, you can get assistance and financial knowledge to plan your retirement by determining what your needs, wants, and desires are.

Now that you know the rights you have for your retirement savings, you should be able to make better informed decisions towards the money you have in your EPF accounts. Remember to consider all the advice shared above before using your retirement savings.

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The Different Types of Business Entities in Malaysia

Starting a new business but unsure of the differences between a private limited company, public limited company, sole proprietorship, and partnership? This article should help set you straight!

Ready to head out on your own and start your own company like you’ve talked about for years? There are quite a few things you need to figure out first. Of course you need your product, some capital, a business plan, and plenty of courage. But before those, you also need to know the kinds of business entities that exist in Malaysia. Why? Because you’re going to have to register your business under one of them.

Different business entities might suit different stages of your business or serve different business needs. Knowing them all and how they’re different from one another will help you understand more about how other businesses function and see your own business idea in a different light, while helping you choose which type of business entity you should register as.

Sole Proprietorship / Partnership

A sole proprietorship is defined by the Companies Commission of Malaysia as a business wholly owned by a single individual using a personal name or trade name. It is also the cheapest and simplest to set up. There is no annual filing requirement, and Malaysia’s Business Registration Act does not require sole proprietors to appoint auditors to audit their accounts. Quick and easy.

But, this ease comes at a price. Sole proprietorship has unlimited liability. Which means if you cannot meet your liabilities, your creditors can go after your personal assets. Since you are the sole proprietor, there is no separation between your assets and the proprietorship’s assets. This can also cause problems if the business is on hard times, since a proprietorship cannot obtain public funds to help itself out.

A partnership is much the same as a sole proprietorship, except there is more than one owner. This is usually set up for professional firms like lawyers and auditors. Otherwise it has the same benefits and disadvantages as a sole proprietorship, except the liabilities and profits are now spread over more than one person.

When Should You Go for a Sole Proprietorship or Partnership?

Taking the pros and cons into account, you should go for this type of business entity if you’re comfortable doing your own audits and your business’ potential liabilities can be sheltered with insurance. For example, a food business might get you personally sued if someone gets sick, but a business selling hats has a lot less liability.

Private Limited (Sendirian Berhad)

This form of business entity is the most commonly seen in Malaysia. Unlike a sole proprietorship or partnership, a private limited company is its own separate legal entity. It can acquire its own assets, go into debt, sue or be sued in its own name and has a perpetual succession until the directors and shareholders decide to dissolve the company. This definitely takes the legal load off of the members of the company.

A private limited company is also taxed as its own entity. From here, the company will get specific tax breaks, rates, and reliefs, among other things. However, with this comes with the extra cost of having to provide yearly accounts audits, annual returns, and doing the aforementioned taxes.

When Should You Go for a Private Limited Company?

If your business might require venture capital funding or any outside funds, or your products and services have specific liabilities tied to them, then a private limited company is for you. A private limited company is also seen as more credible, since it’s much harder to dissolve compared to a sole proprietorship or partnership.

Limited Liability

This is somewhere between sole proprietorship and private limited. The Companies Commission of Malaysia has only quite recently introduced this option to Malaysian entrepreneurs in 2013 so one immediate disadvantage is how local banks are still new to the idea of limited liability companies and setting up a bank account for it might be a bit troublesome.

Even state-level CCM officials can be unsure about the processes necessary to go through the registration of a limited liability company.

When Should You Go for a Limited Liability Company?

Since there’s less liability than a sole proprietorship or partnership but not as many breaks tax-wise, (it even has a more expensive annual fee than private limited companies) we can’t yet recommend your business to go for this type of entity. Perhaps in future when more companies adopt limited liabilities, we can feel better about recommending this. For now, choosing between a private limited and a sole proprietorship or partnership seems the headache-free way to go.

What About Public Limited Companies?

To oversimplify things a bit, a public limited company is kind of like when a private limited company offers its shares to the public. Which means this business entity is not one a company can become immediately without being a private limited company first. So for first-time businesses, this option is not available.

There you have it. The different types of business entities your company can become. Now that you know these, we hope you can form a better plan and make more informed decisions on how your future company will be like. Any questions, concerns, or suggestions? Drop them in the comments section down below!

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Do You Think It’s a Good Idea to Go Completely Bankless?

What if you decided to do away with your bank account completely? Find out if you’d be better off without essential banking services.

Having the second-highest level of bank account ownership in ASEAN, we can safely say that many Malaysians are not opposed to basic bank services, but there are still those who do not currently believe in its necessity or even have an account. That is to say, we Malaysians use bank services a lot. But not all of us enjoy the idea of banks completely.

Imagine a world where people just keep their own cash at home. No borrowing or lending from an institution, no credit cards, no loans, and no savings accounts, because there are no more banks. Does this world sound attractive to you?

Why Some People Might Want to Go Bankless

Often times the perception of high fees or the assumed difficulty associated with opening a bank account can lead some to consider forgoing a bank account altogether. Furthermore, some people may carry the idea that banks are inherently bad agents that only seek to gouge the public with extortionate interest rates and enticing people to get into debt. These strong feelings of distrust and frustration may lead them to not use banks at all.

But is it really a better choice to simply go without what has become a commonplace modern convenience? Let’s take a look at the potential pros and cons:

Pros of Being Bankless

A major plus point for these folks that stay bank-free is that they will not incur any account maintenance fees or ATM charges when withdrawing money. Those tiny percentages do add up.

Secondly, some complain about the potentially low interest earnings on savings when compared to returns received from investing in stocks or other instruments.

Another advantage is that it’s much easier to avoid lifestyle creep or lifestyle inflation. Banks often offer to increase your credit limit or credit card with extra perks when your income is found to have increased. This is great incentive for you to keep spending with the bank, even though you don’t actually need to.

Cons of Going Bankless

Let’s see what costs may be incurred as well as the conveniences forgone by not having a bank account:

For one, making bill payments will be troublesome and likely to eat up more time and perhaps even money, if we factor in transport costs.

Next, the notion of keeping your savings under the mattress at home instead of in a bank is rather risky; you can lose all your money in a fire or burglary. Also keep in mind that hard cash is made of materials that can deteriorate over time. Whereas digital bookkeeping in banks means your funds are always accounted for.

Big ticket items like houses and cars require large amounts of cash on hand if you want to pay for it in full. Not having a bank means buying expensive items take a lot longer and is more dangerous, too.

Besides housing loans and car loans, banks also provide personal loans, student loans, and business loans. With no more loans, many people’s education, lives, and businesses will never make it to fruition.

One more disadvantage is that you have to carry cash on you at all times. Which is not a safe thing to do. With a bank account you can safely carry a bank card that won’t weigh your pockets down and has fraud protection too (depending on the card of course) in case your card goes missing.

How to Make the Most Out Of Your Bank Accounts

Despite our frustrations with banks sometimes when things don’t quite go our way, it’s hard to argue against the prevailing necessity of a bank account to live and work in the modern world. For those new to using banks, we suggest you try these to make the most of your bank accounts:

• Sign up for online banking and take advantage of convenient services on offer such a complimentary bill payment services, easy access to your statements and online shopping.
• Get a debit card and carry less cash; you’ll find that it is not only safer (as we’ve covered) but rather convenient too.
• Keep the minimum amount in the bank and you might not have to pay for admin fees, you can simply cover it with interest or dividend earnings.

If you are still without a bank account, you might want to consider opening a basic savings account that only requires a low minimum deposit. 

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Things to Remember Before Renting Out Your Spare Room

Looking to sublet your flat or apartment for some extra cash? Here are some things you need to pay special attention to...

Have you ever considered being on the other side of Airbnb by renting out the spare room you have in your house? You may think that this is only possible if you own the house yourself, but in fact, you can still rent out a spare bedroom to a guest even if you yourself are renting the place. This practice is called subletting or sub-leasing. Not only is this a lucrative practice, providing a tidy side income, it's also a good way to make use of that empty spare bedroom you have that's just sitting there.

As with many new endeavours, it can be intimidating to start subletting your place right away, but we've made a handy guide to help you with the basics of subletting.

Check for Legality

Tenancy agreements in Malaysia typically do not allow for subletting. However, you can always ask your landlord whether or not they're willing to allow you to do so. Chances are good that they would be understanding. Keep in mind that government housing units are legally never allowed to be subletted to any third party, but privately owned housing can. It still depends on what your landlord says about the situation.

To make it easy for them to say yes, convince them that any dealings regarding rent or utility payment still goes through you. This minimizes the hassle for them and is also good practice for being a subletter. You may be tempted to start subletting without informing the owner of the property but should things go wrong with your tenants or if they start suspecting something amiss, they may end up evicting them (and you). That is not what we want here.

Be Vigilant

Just because you own the place or have permission from the owner, doesn't mean everything else is automatically hunky dory. Subletting your place means your house is now vulnerable to potential theft, property damage, and other risks that you will now have to be responsible for. Make sure you and everyone else living with you already know the risks involved.

Remove any valuables or costly furniture that you don't want ruined or any private items that you wouldn't want strangers to find or rummage through. The financial rewards for subletting can be attractive but you have to ensure that everyone else in the house is comfortable with the liabilities involved, too.

Make a Reference Notebook

Before even beginning to look for tenants, one thing that can be of tremendous help is to have a reference notebook. In it, you should have pictures of the house, descriptions of any pre-existing damages, facilities, landmarks, and other details. Things you may already be familiar with in the house may be a jarring surprise to someone new.

Having details described up front will also help you claim for damages if any happen. Inside this notebook should also be information on when you expect which payments to arrive, important contact numbers, specific house rules, what to do in case of emergencies, and so on.

Start With a Small Pool of Candidates Already in Mind

With safety in mind, it's wise to begin looking for tenants from the people you already know. Ask around among your friends, family or close acquaintances. They're less likely to screw you over with late payments or property damage. In fact, they're more likely to have a vested interest in keeping your house and your belongings safe. If there really is nobody in that circle who can be potential tenants, you can start with advertising at a nearby college. Student can always use places to stay, and there may sometimes be visiting professors on sabbatical looking for temporary lodging.

Filter For Crazies

There's no better way to say this, but it's important in searching for tenants that you screen for potential weirdos. You can do this by paying attention to how they communicate via phone or email. Alternatively, you can ask them to go through a quick interview. One good line of questioning is why they're choosing to rent at your place and what happened with their previous landlord. Don't be afraid to ask personal questions as this person will effectively live with you for however long they want their tenancy to last. A problematic tenant can cause problems down the road you may not be equipped to deal with.

Don't forget to include the other members of the house in the interview. A potential tenant who seems uncomfortable to live with you may be just shy or tired and you may not be the one who picks that up. Also, a candidate who gets along swimmingly with the majority of your household except for you should still be considered as long as they don't annoy you too much.

Write Everything Down

Once you find a suitable tenant that everybody agrees on, the next step is to ensure that you get everything in writing. Ask for references, request a deposit, and load up a quick written agreement for them to sign once they're confirmed. You will have to be a landlord of sorts to the tenant, therefore you must start acting like one. Having everything written down helps keep dealings well-documented and avoids any hanky panky.

Subletting is a good way to make some cash on the side, and you may already have the capital you need to get this one going. It's also a good way to get to know new people without having to get out of the house. Do you guys know of any other subletting tips for newbies that we missed out on? Maybe you have a subletting story of your own you want to share with us? Do let us know in the comments section below!

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Learn the Secret Language of Food Packaging to Save on Groceries

Sometimes the dates on your food packaging don't mean exactly what you think... Here is how to read them to properly understand your food and waste less!

Saving money isn't just about spending less, but it's also about getting more from what we already have. Like we've covered before, food waste is something all of us can be a lot better with. Aside from squeezing the most out of our leftovers, there's also one other way we may have been wasting our food. That would be through throwing away perfectly good food while they're still in their packaging.

How can we be making that mistake? The expiration date is printed right on them! Ah, but are those really expiration dates? While our Ministry of Health advises that we consume all goods well before any of the dates printed on any packaging, our research has revealed (and many international health and food organizations agree) that there are slight differences in what the dates on food packaging actually mean.

Identifying these differences and applying them when shopping and using food can help us optimize our grocery budget while being smarter with our money.

Best Before

May also be worded as “Better Before”, the dates this label refer to the quality of the item inside, not safety. Typically you see these printed on a wide range of frozen, dried, tinned, and other foods. When the dates are passed, it doesn't necessarily mean that you might get sick, but the item might start to lose flavour, colour, or texture.

If you're on the fence on consuming foods that are no longer at their best, what you can do is cook them thoroughly in high heat. High temperatures kill off most harmful bacteria like salmonella and E. Coli. So when you're buying a food item you intend to cook anyway, you don't have to spend cash to renew your stock if the items have only passed their “Best Before” date.

Use By

You will see "Use By" dates on food that goes off quickly, such as meat products, ready-prepared salads, and pre-packaged sushi. As it properly implies, you should not use an item past its “Use By” date even if it looks and smells fine as this can put your health at risk. Types of food that have a “Use By” date usually also include usage instructions like “eat within three days of opening” or “consume within a week”. Failure to comply with these recommendations can put you at risk of food poisoning.

To optimize your grocery budget, remember to only buy food with this label if you know you'll be using them soon. Alternatively, you can freeze the food to extend their shelf life beyond the date, but remember to follow any freezing instruction on the packaging if there are any.

Sell By / Display Until

These two essentially mean the same thing and are meant for the retailer and not the consumer. Retailers are meant to take these items off the shelves by the date on the packaging and stop selling them. Normally, this is either because the item will no longer look attractive or begin to smell. It has little to do with the food being bad for consumption, however. Sellers may instead sell it as animal feed or repurpose it as ingredients for prepared food at a different part of the store.

So if you notice these labels on the food you have at home, remember that they don't point to a date where the food will be harmful. You can use them normally, without having to throw anything out.

Those are the three main variants of food labeling that relates to spoilage. They often appear in conjunction or in different combinations, so take some time to figure out which date the food truly becomes unusable at all.

Important Things to Keep in Mind

• All the dates printed on the packaging of course only apply if you closely follow the storage instructions included alongside. Don't expect your dried squid to still be tasty if you've been leaving it unopened out in the rain, for example. The storage instructions affect the quality of the contents quite a lot, so it's best to pay attention to them.
• Speaking of storage, freezing any food item extends its shelf life past their printed dates, but remember to use them within 24 hours of thawing. Thawed foods rapidly deteriorate and are particularly vulnerable to bacteria.
• Some products even have a date of packaging. This should have no effect on your purchasing decisions, unless a recent food recall is announced. A product recall will mention which production batch to avoid by date.

One last thing to remember is that your health is more important than saving some cash. While it does help to know which types of food can be used for a while longer than the packaging says, if you have a sensitive stomach, are serving food to babies, small children, the elderly, or people who are already unwell, err on the side of caution and stick close to the dates on the boxes.

Armed with this information, we hope you can now waste a lot less food and be a much better shopper at the same time. For a handy guide to how long different types of foods can last, check out this handy website StillTasty. Do you have any other money-saving tips for grocery shopping? Do let us know in the comments section down below!

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