As of January 2026, Malaysia’s Employees Provident Fund (EPF) has entered a new phase of transformation. Following the major EPF account restructuring in 2024 and subsequent policy updates through 2025 and 2026, the fund has evolved from a rigid retirement savings vehicle into a more flexible, life-cycle-based social protection system.
These changes are not cosmetic. They fundamentally reshape how employers manage payroll costs and compliance, and how employees plan for retirement, emergencies, and long-term financial security.
The new EPF framework is built on three pillars:
- Account Restructuring
- Mandatory Inclusion (Foreign Workers)
- Retirement Income Adequacy (RIA)
This guide explains what has changed and what it means for employees, employers, and business compliance in Malaysia.
EPF Three-Account Structure (Effective May 2024)
The most significant structural change is the introduction of the EPF three-account system, fully implemented for members below age 55 since May 2024.
Under this system, monthly EPF contributions are now split into three accounts with distinct purposes:
- Akaun Persaraan (75%): Dedicated strictly to retirement savings and long-term accumulation.
- Akaun Sejahtera (15%): Allocated for mid-term needs such as housing, education, and healthcare.
- Akaun Fleksibel (10%): A new flexible account that allows withdrawals at any time for any purpose, subject to a minimum withdrawal of RM50.
This restructuring reflects a deliberate shift toward balancing retirement security with present-day financial realities. Employees now have built-in liquidity for emergencies, while still preserving a core retirement fund.
For example, an employee earning RM4,000 per month contributes a combined 24% (employee and employer). Under the new structure, contributions are distributed across the three accounts, creating both immediate flexibility and long-term savings growth.
However, flexibility comes with a trade-off. Frequent withdrawals from Akaun Fleksibel may reduce compounded retirement savings over time. A withdrawal of RM2,000 today could potentially reduce retirement funds by over RM11,000 after 30 years, assuming a 6% annual dividend.
This illustrates the core tension in the new EPF system: short-term financial relief versus long-term retirement adequacy.
We answer the most pressing FAQs about EPF Account 3
Mandatory EPF Contributions for Foreign Workers (From October 2025)
Malaysia introduced mandatory EPF contributions for foreign workers in October 2025. Both employers and non-Malaysian employees must now contribute 2% each, excluding domestic workers.
This policy aligns Malaysia with international labour standards and reduces cost disparities between hiring local and foreign employees. For employers, however, it represents an immediate increase in payroll expenses, particularly in labour-intensive sectors such as construction, manufacturing, and plantations.
Companies must also ensure proper registration and ongoing contribution management for foreign employees. Failure to comply can result in penalties and operational disruptions.
Get our Step-by-Step Guide for Foreign Workers EPF Contribution in Malaysia
Retirement Income Adequacy (RIA) Framework (Effective 1 January 2026)
The Retirement Income Adequacy (RIA) Framework, fully launched in January 2026, represents a major shift in Malaysia’s retirement philosophy. Instead of focusing on a one-time lump sum at retirement, the framework emphasises sustainable monthly retirement income.
Based on the latest data from the Belanjawanku 2024/2025 guide, the framework sets three savings benchmarks to support retirees over a 20-year period from age 60 to 80:
- Basic Savings: RM390,000 to cover essential living expenses
- Adequate Savings: RM650,000 for a reasonable standard of living
- Enhanced Savings: RM1.3 million for a higher quality of life and greater financial freedom
| Tier | Savings Target (at age 60) | Purpose | Estimated Monthly Payout (Year 1) |
| Basic Savings | RM390,000 | Covers essential survival needs (food, utilities, basic healthcare). | RM1,625 |
| Adequate Savings | RM650,000 | Provides a “meaningful” life with a reasonable standard of living. | RM2,708 |
| Enhanced Savings | RM1,300,000 | Supports a higher quality of life, greater mobility, and financial freedom. | RM5,417 |
Note on Payouts: These payouts are designed to grow over time to hedge against inflation.
For example, a “Basic” retiree starting at RM1,625/month could see their payout rise to RM4,434 by Year 20 through disciplined drawdown and continued dividends.
These benchmarks influence not only retirement planning but also pre-retirement withdrawal rules, investment flexibility, and savings behaviour throughout a member’s working life.
The RIA framework also assumes payouts will grow over time to hedge against inflation, reinforcing the importance of maintaining sufficient capital within the EPF system.
RM1 Million Withdrawal Threshold
Under previous EPF rules, members with savings exceeding RM1 million could withdraw the excess at any time.
Under the new RIA-aligned policy, this threshold is gradually increasing to preserve more retirement capital:
- RM1.1 million in 2026
- Incremental increases of RM100,000 annually
- Target threshold of RM1.3 million by 2028
This adjustment ensures more members retain sufficient savings to achieve at least the “Enhanced” retirement lifestyle benchmark.
EPF Members Investment Scheme (MIS)
The EPF Members Investment Scheme (MIS), which allows members to invest EPF funds in approved external investments such as unit trusts, now operates under tighter guardrails.
Members can only invest up to 30% of the excess above their Basic Savings requirement for their age. As the Basic Savings benchmark rises annually, the amount eligible for external investment decreases.
This policy ensures that core retirement funds remain protected within EPF while still allowing controlled investment flexibility.
What Does the New EPF Changes Mean for Employees?
For employees, the introduction of Akaun Fleksibel provides a built-in emergency fund that can reduce reliance on high-interest personal loans or credit facilities during financial stress.
Additional policy enhancements also support broader workforce segments. The increased Hajj withdrawal limit and expanded i-Saraan Plus incentives for gig workers create more inclusive retirement savings opportunities across formal and informal sectors.
However, increased withdrawal flexibility also raises the risk of long-term savings leakage. Younger employees who frequently withdraw from flexible accounts may lose decades of compounded dividend growth, potentially creating retirement shortfalls in the future.
Financial discipline and informed planning are therefore more important than ever under the new EPF structure.
What Should Employers Prepare For in Light of the New EPF Changes?
For employers, the new EPF landscape introduces both cost implications and compliance responsibilities.
Mandatory EPF contributions for foreign workers increase payroll expenses, while stricter administrative requirements demand stronger HR and payroll systems. Employers must ensure timely digital stamping of employment contracts via the LHDN STAMPS platform and proper EPF registration for all employees.
These changes require closer coordination between HR, finance, and compliance teams to avoid penalties and operational inefficiencies.
At the same time, the more flexible and inclusive EPF structure can support talent attraction and retention. A modernised retirement framework enhances employer value propositions, particularly when competing for skilled workers in a tight labour market.
More Than Just A Retirement Update
EPF 2026 is more than a retirement update as it impacts payroll structuring, foreign worker costs, contract compliance, and long-term workforce planning.
If you are unsure how these changes affect your organisation, Bispoint’s advisory team can help you review your EPF compliance framework, optimise payroll strategy, and reduce regulatory risk.
Speak to our consultants today and ensure your business stays future-ready.
