EPF is more than just a savings account for us, it is a safe investment avenue which guarantees an annual dividend of 2.5%, but has often paid much higher returns.

You’ve probably heard recently that EPF has declared returns of 6.10% (conventional savings) and 5.65% (shariah savings) for 2021.

What can 6% do for you?

Maybe 6% doesn’t sound like much, but let’s take a look at its effects:

Assuming you have RM10,000 in your EPF, after 30 years you can grow your savings up to RM51,117 just by leaving it there (assuming the dividends are on average 6%).

[Note: EPF has been able to deliver returns between 5-7% in the past 10 years]

Over 30 years, the 6% rate of return makes a huge difference compared to 3% (Fixed deposit account) or 0.08% (a normal savings account) which only grows your initial savings up to RM22,879 and RM12,500 respectively. So, EPF is the better option to leave your savings for the long term.

When you invest, your investment benefits from compounding. Compounding is the process in which the earnings from your dividends are reinvested to generate additional earnings over time.

Here’s an illustration of how compounding works in real life. Say you’ve got RM10,000 saved via EPF and every year you receive a dividend on that money.

For each year that passes, a larger amount of savings gets reinvested because you are reinvesting BOTH your initial savings of RM10,000 and the dividends that you earned the years before.

In 10 years, you’ve earned much more just by leaving your initial savings untouched. That’s the impact of compounding.

EPF 6.1% Returns - What Does it Mean 5 - Multiply - Retirement

*Based on actual past EPF rates

The good news is, in real life, you are probably topping up your EPF investment through monthly salary deductions or voluntary contributions. Imagine how much more you will be earning!

You may be seeing your funds grow already from the past years but don’t be so quick to start enjoying these returns. It is important to be clear on the reasons you are withdrawing from EPF and if it is absolutely necessary, so that you reap higher rewards of the dividends earned yearly.

Watch this video to learn more about when you can withdraw from EPF

Multiply’s Suggestion:

If you’ve withdrawn earlier, or already have a steady amount, there is no better time than now to start increasing your EPF savings. You can do this in several ways:

Scenario	You can:
If you are already contributing monthly from your salary deductions	Contribute more by increasing from the standard 9% to the 11% contribution
If you are already contributing 11%	Contribute even more voluntarily and easily through EPF’s Self Contribution options
If you are self employed	Invest in EPF by contributing through i-Saraan