If you want to diversify the money in Account 1 of your Employees Provident Fund (EPF, a.k.a. KWSP) by taking it out to be managed by local Unit Trust fund managers and invest in EPF approved unit trust funds, which then invest in various markets locally or globally or both, depends on the funds' prospectus, the first thing you need to know is: what is the maximum amount of money you can take out from your EPF Account 1 to invest in those approved unit trust funds?
Begining 1 January 2017, EPF has enforced a new formula for this calculation, and the old formula used before was no longer valid.
While the old formula only allowed you to take out a maximum of 20% of your (Account 1 - Basic Savings) for unit trust investment, the new formula allows you to take out more. The maximum is now 30%.
The new table to calculate your Account 1 Basic Savings is as below:
For example, if you are borned in 1982 and your EPF Account 1 has RM100,000, your Basic Savings is RM50,000. Maximum amount you can take out for unit trust investment is (RM100k - RM50k) x 30% = RM50k x 30% = RM15k.
Same as before, you can withdraw your EPF Account 1 money for unit trust investment once every 3 months.
To make the case simple, assume that your EPF money does not increase.
Amount in Account 1 after the withdrawal = RM100k - RM15k = RM85k
3 months later...
Available amount for unit trust investment = (RM85k - RM50k) x 30% = RM10.5k.
You can continue the process every 3 months until your available amount for unit trust investment become zero or negative.
- Normally, there will be around 3% one time charges by the unit trust company for this kind of investment. Subsequent years' management fees of around 1.5% are reflected in the fund price.
- Make sure at the end of the year, you are confident your fund can give you return higher than your EPF dividend. Otherwise, it is better to let your money stay in EPF.
- You are not necessary to withdraw the maximum amount. Any amount less than the maximum allowed is OK.
- You are not necessary to withdraw every 3 months. You can adjust the timing based on market conditions.
- You are not necessary to invest into the same fund for each withdrawal. You can choose different fund to invest, as long as approved by EPF.
- Once you sell out your unit trust, the money will go back to your EPF Account 1.