The second of new initiatives introduced by the Employment Provident Fund (EPF) on 1 Feb 2008 will see a lowering of the Account 1 investment withdrawal threshold. This move is expected to result in a significant flow of capital into the equity market.
Last Friday, the EPF introduced its Beyond Savings initiative that links the threshold for Account 1 withdrawals for investment through approved institutions to the member’s age. Previously, investors of all ages had to maintain at least RM50,000 in their Account 1.
Under this new scheme, a younger member would have a lower threshold and an older member a higher threshold. For example, a 30-year-old member may withdraw 20% of the amount in excess of his threshold of RM18,000 to invest through approved institutions.
According to EPF deputy chief executive officer (operation) Ibrahim Taib, the new initiative was expected to double members’ withdrawals for alternative investment from a monthly average of RM270 million to RM300 million. The move gives members the advantage of investing at a younger age. The policy change would enable 1.76 million members to withdraw from Account 1 for investment elsewhere, compared with 850,000 eligible members previously.
Analysts are welcoming this initiative. OSK Research head Kenny Yee said the unit trust sector would most likely benefit the most from this move. Agreeing with this, an analyst with a local bank-backed research house was quoted by The Edge in saying that the move would mean people will have more funds available for investment. Another analyst at an investment bank said this would encourage people to diversify their investment portfolio.