SHAH ALAM, Feb 28 — The proposal to allow Malaysians to buy medical insurance using part of their Employees Provident Fund (EPF) savings is a good thing, as it would ensure they can get quality healthcare and get back to work to continue earning an income, EPF’s CEO said today.

EPF CEO Ahmad Zulqarnain Onn also said that Malaysians’ adequacy of EPF savings for their retirement would not be affected by this proposal.

The Malaysian government recently said a basic medical insurance (known as base MHIT plan) for private medical bills will be launched next year, with Malaysians able to either use their own money (including their income, or savings in EPF’s Akaun Sejahtera) to buy it.

Zulqarnain said the base MHIT plan is a good idea, describing it as a “cross-governmental effort to introduce a basic level of medical insurance that’s available for all Malaysians.”

“We are waiting for the details from Bank Negara and the insurance industry on specific terms of those policies, but in principle it is a good thing, because Malaysians are generally under-insured for medical to begin with, so this is a positive development,” he said at a media briefing here at Menara KWSP on EPF’s 2025 dividend rate.

Is it okay to use EPF’s Account 2 (Akaun Sejahtera) to buy medical insurance? 

For those aged below 55, EPF savings are typically placed in three separate accounts (Akaun Persaraan or Account 1 which can only be withdrawn from after age 55; Akaun Sejahtera or Account 2 where certain withdrawals can be made before age 55; and Akaun Fleksibel or Account 3 where EPF members can withdraw money at any time at any age).

The bulk or 75 per cent of your contributions to EPF savings would go to Akaun Persaraan, which would form the majority of your retirement savings, while 25 per cent goes to Akaun Sejahtera and 10 per cent goes to Akaun Fleksibel.

When addressing the question of whether EPF members should be able to use Akaun Sejahtera to buy medical insurance, Zulqarnain pointed out that EPF members currently are able to use money from Akaun Sejahtera to buy insurance for critical illnesses and life on EPF’s i-Lindung platform. 

“Under our i-Lindung facility, EPF members already have the ability to use Account 2 to buy policies for critical illnesses and life - so these are lower premium policies that are available from a number of insurers on the i-Lindung platform.

“So if the proposal is for EPF to include medical and health insurance and takaful onto the i-Lindung platform as well, so that we complement critical illness, life, with medical and hospitalisation, so the question then becomes why should EPF allow for this to be used for medical insurance,” he said.

Zulqarnain explained that EPF measures the adequacy of EPF members’ retirement savings by only looking at Account 1 (Akaun Persaraan), and does not include the two other accounts (Account 2 / Akaun Sejahtera or Account 3 / Akaun Fleksibel) when measuring “whether you have adequate savings or not”.

When looking at if someone has enough retirement savings, he explained that it would not make sense to include Akaun Fleksibel as money in it can be withdrawn at any time.

“So using Account 2 will not detract or reduce adequacy, because adequacy is only from Account 1,” he said.

Zulqarnain also pointed to the benefit of having medical insurance.

“The second point I will add is that it is beneficial for our members to have adequate protection, because it is with adequate protection and adequate healthcare, that in aggregate, your ability to generate income is protected. You cannot generate income if you are sick, and that is the logic behind it.

“It is better for you to buy protection while you are young in particular when it is cheap, so you protect yourself and your family against adverse events, and you are able to access quality medical care to allow you to return back to work.

“Because your ability to save for your retirement is not magical, it is not automatic. It is dependent on your ability to work.

“So protection against critical illness, protection against life, and now protection against medical is in line with the rationale that every single individual should be able to access protection, takaful or insurance, so that he or she is able to generate income,” he said.

Zulqarnain was asked to respond to a think tank’s recent warning against allowing the withdrawal of EPF savings to buy medical insurance.

On February 2, Galen Centre for Health and Social Policy objected to the proposal to allow the use of EPF savings to buy medical insurance, as it said EPF savings are meant for Malaysians’ retirement and diverting the money to insurance premiums could risk creating a longer-term financial problem for its members. 

Currently, under EPF’s Retirement Income Adequacy (RIA) Framework which serves as a guide for Malaysians to know how much they should have in savings for retirement, there are three tiers that EPF members can aim for by retirement age or by age 60:

Basic Savings (RM390,000);

Adequate Savings (RM650,000);

Enhanced Savings (RM1.3 million).