Employees Provident Fund (Kumpulan Wang Simpanan Pekerja) in Malaysia: A Complete Guide

Key Takeaways

• The Employees’ Provident Fund (EPF Malaysia), also known as KWSP, is a mandatory retirement savings scheme that helps employees build long-term financial security through structured contributions and annual dividends.

• EPF contribution rates are shared by employers and employees and vary by age, salary level, and nationality, including mandatory EPF contributions for foreign employees starting October 2025.

• EPF savings can be withdrawn for approved purposes such as housing, education, medical expenses, Hajj, and leaving Malaysia, making EPF a flexible financial tool beyond retirement.

• Through EPF i-Lindung, members can use Account 2 savings to purchase affordable insurance protection, including PRUGuard Family for life and total permanent disability coverage, and PRUCare Family for critical illness protection.

• Understanding EPF contributions, withdrawals, and i-Lindung insurance options helps Malaysians plan better for retirement readiness, financial protection, and long-term wellbeing.

Employers all over the world offer numerous benefits and perquisites to ensure optimum employee safety and a lower attrition rate. In addition, governments in several parts of the world have established compulsory norms for employees to ensure their wellbeing.

One such prevalent practice that most of us are acquainted with is the Employees’ Provident Fund (EPF). When you receive your salary slip, you often come across the term EPF, which has been deducted from the gross salary payable to you.

In case you are wondering what it is and why it has been deducted from your pay, this article discusses the basics of Malaysia’s Employees’ Provident Fund and everything else you would need to know.

What is the Employees’ Provident Fund?

As of September 2025, over 16.5 million Malaysians are covered under this act..

Also known as Kumpulan Wang Simpanan Pekerja (KWSP), EPF initially saw the light of the day in 1951 after the passing of the Employees’ Provident Fund Ordinance 1951.

EPF is a social security law formed under Act 452 of the Employees’ Provident Fund Act 1991 and seeks to provide retirement benefits to its members to ensure optimum financial security when the age is not on their side.

Employees' Provident Fund Act 1991

Established as the EPF Act 1951, the Employees’ Provident Act was subsequently updated in 1991 to become the EPF Act 1991. It intends to secure employees’ retirement period by pushing them to keep aside a part of what they earn. In addition, it also holds employers responsible for ensuring that their employees have enough retirement savings.

Is KWSP and EPF the same?

Yes. EPF is also known as KWSP or Kumpulan Wang Simpanan Pekerja in Malaysia. It is a retirement fund created as a federal statutory body managed by the Ministry of Finance in Malaysia.

Who needs to contribute to the EPF?

The EPF contribution comprises two parts - one from the employer and the other from the employee. An employer is a person, such as a manager, agent, or any other entity, who provides employment opportunities to other individuals and has a contract of service or apprenticeship.

An employee is a person who is employed and receives compensation under a contract of service or apprenticeship.

What type of payments are liable for EPF deductions?

The EPF covers any remuneration in the form of money or money’s worth due to the employee under their contract of service or apprenticeship, payable monthly, weekly, daily, or as agreed upon.

So, here are the payments liable for EPF contribution: 

• Salary
• Bonus
• Allowance
• Commission
• Incentives
• Payment for unutilised annual or medical leave
• Arrears of wages
• Wages for paid leaves (study, maternity, or otherwise)
• Other wages as stated under contract or otherwise

What is the EPF contribution rate for 2026?

Under the Employees’ Provident Fund Act 1991 (Third Schedule) with rates effective from October 2025 for salaries paid that month or later, EPF contributions vary based on an employee’s age and nationality status. 

For Malaysian Citizens & Permanent Residents (Below 60 Years)

• Employee contribution: 11% of monthly wages

• Employer contribution:
  • 13% of monthly wages for employees earning RM5,000 or less
  • 12% of monthly wages for employees earning above RM5,000

For Malaysian Citizens & Permanent Residents (60 Years and Above)

• Employee contribution: 0% (no mandatory employee share)

• Employer contribution: 4% of monthly wages 

These contribution rates are the statutory minimums; employers may choose to contribute more if offered under company benefits policies.

New mandatory EPF contributions for foreign employees (Effective October 2025)

A major update to the EPF Act now requires foreign employees working in Malaysia (with valid employment passes) and their employers to make mandatory EPF contributions. 

Starting with salary payments from October 2025, both sides must contribute 2% of the employee’s monthly wages each to the EPF. This replaces the previous optional arrangement and brings broader retirement savings protection to non-Malaysian employees. 

Key points of the updated policy:

• Applies to foreign employees holding valid work permits and excluding domestic servants. 

• Contributions must be remitted by the 15th of the month following the wage month (e.g., October salary contributions due by 15 November 2025). 

• Foreign employees can opt to contribute at higher rates (e.g., 11% like Malaysian rates) by submitting the required EPF forms. 

This update expands social protection coverage and encourages structured long-term savings for all workers in Malaysia, regardless of nationality.

What is EPF self-contribution?

EPF is not limited to only salaried individuals but is extended to others, too. The Malaysian government encourages voluntary participation of others not compulsorily covered under the law. For this, they must file the contribution payment via Form KWSP 6A(1).

Here are the individuals allowed to make an EPF self-contribution:

• Sole proprietors or business partners, retired workers and others are not covered under the term ‘employee’ in the EPF Act 1991.
• A domestic servant employed by an individual working in their residential home.
• Any Malaysian citizen who has withdrawn all their savings under the Leaving the Country Withdrawal Scheme previously but has returned and is employed and working in the country.

When should EPF contributions be paid?

These employers’ contributions to the EPF must be paid to the employees by the 15th of the following salary month.

In case they miss the due date and make payment after that, they would be liable to pay interest on such late payments. While the minimum interest charged is RM10, the actual amount depends on the dividend rate declared by the EPF Board. The board declares the dividend rate annually, and the employer has to pay 1% extra over the announced rate, with the final amount rounded to the next higher Ringgit (RM).

If the contribution date exceeds the last day of the following month, an additional dividend charge will be added to the interest due. The dividend due will be credited to the employee’s EPF saving account.

How to make EPF payments?

Payments, whether by self or by the employer on behalf of their employees, can be completed online. For this, they must visit the KWSP website, login into their account and enter the requisite details.

As for payment modes, the KWSP application supports FPX (Financial Process Exchange), DDA (Direct Debit Authorisation), and Maybank2u for those who want to pay directly.

Alternatively, individuals can use internet banking or cash/cheque/MyDebit Corporate Card of supported banks for payments. In case someone wants to pay offline via cash or cheque, they can visit the EPF counters closest to them to complete the payment. 

Can I withdraw EPF for personal use?

While EPF is primarily to cover your retirement days, there are several different use cases in which you can use the funds accumulated in your EPF account. Here are some of the most common use cases: 

EPF withdrawal for housing

Having a house that you can call yours is one of the things that every individual should accomplish before they retire. So, Malaysian laws allow individuals to use their EPF funds to build a house or pay their EMIs for acquiring a home, but withdrawals are not permitted for renovation.

EPF withdrawal for medical bills and equipment

Suppose your illness falls within the list of approved critical conditions by the EPF board. In that case, the law allows you to withdraw from the provident fund to cover the treatment costs and any ancillary expenditure for purchasing medical equipment (for yourself or your close family members).

EPF withdrawal for education

The cost of education is on the rise in the country and worldwide. So, EPF allows the withdrawal of funds for tertiary education and covers the tuition fees cost. In addition, if you want to repay your PTPTN loan, you can use your EPF to do so partially too. Furthermore, repayment of other study loans and institution fees are also covered.

EPF withdrawal for leaving the country

For those looking to shift from Malaysia and renouncing their citizenship or foreigners who have been working in the country but now plan to leave, the EPF law allows them to withdraw the entire funds accumulated in their account.

EPF withdrawal for Hajj

If you plan to take a Hajj trip, the EPF rule allows you to withdraw funds for the pilgrimage.

Can I use EPF to buy insurance or takaful plans?

Recently, the EPF has launched the i-Lindung platform that allows purchasing insurance and takaful products. It includes life and critical illness protection for EPF subscribers, which can be purchased at affordable premiums via i-Akaun using funds from your EPF Account 2. EPF-approved Insurance and Takaful Operators include Prudential Assurance Malaysia Berhad, Prudential BSN Takaful Berhad, Etiqa Family Takaful Berhad, Etiqa Life Insurance Berhad, and FWD Takaful Berhad.

Who is eligible to apply for EPF i-Lindung?

Malaysian EPF members who have a balance in their EPF account 2 and i-Akaun users are eligible to apply for EPF i-Lindung. To start the application, download the i-Akaun application.

What type of protection does EPF i-Lindung offer?

Under the EPF i-Lindung programme, EPF members can use funds from their EPF Account 2 to purchase affordable life and critical illness insurance plans for themselves and their immediate family members (including spouse and children) directly through the EPF i-Akaun platform. 

This makes it easier to protect your loved ones against financial hardship arising from death, disability, or serious illness. Prudential currently offers two key protection plans through i-Lindung:

PRUGuard Family

PRUGuard Family is a simple term life insurance plan that provides financial protection in the event of death or total and permanent disability (TPD) for both you and your covered dependents. Coverage can extend to your spouse and children, giving you peace of mind that your loved ones are protected financially should the unexpected occur.

Key features include:

• Death and TPD benefits up to the chosen sum assured. 

• Accidental death benefit with up to 3 times coverage on top of the base sum assured. 

• Annual renewable protection up to age 75 for each covered member. 

• Affordable annual premiums that are deducted directly from your EPF Account. 

This plan helps ensure that your family’s financial needs are supported if you or a covered family member is no longer able to provide income due to death or TPD.

PRUCare Family

PRUCare Family focuses on critical illness protection. It provides a lump sum benefit if you or your covered dependents are diagnosed with one of the covered critical illnesses. This benefit can help with medical expenses, caregiving costs, or other financial obligations at a time when treatment and recovery may be your priority. 

Highlights of this plan include:

• Coverage for a range of critical illnesses as defined by the policy. 

• A death benefit that provides financial support if the insured or covered family member passes away. 

• Affordable annual premiums with payment through EPF Account deductions. 

Together, PRUGuard Family and PRUCare Family offer complementary protection with one focused on life and disability, and the other on serious health events, giving you the flexibility to choose the level of coverage that best suits your family’s needs. 

How to sign up for EPF i-Lindung?

Signing up for the plans offered by EPF i-Lindung is straightforward. All you need to do is download and log in to the EPF i-Akaun app. Then, select, ‘i-Lindung’ and fill in the needed information.

Once you’ve done so, you can select your insurance plan and proceed with paying the premium. The premium will be deducted from your EPF account.

For more information on EPF i-Lindung, read ‘i-Lindung KWSP: Life Insurance and EPF’

EPF is a vital enabler to a peaceful retirement

The portion of your earnings going towards your EPF is crucial to ensure financial stability when you retire. Given its purpose, if you are thinking of withdrawing funds from it before you retire, you must understand that you should not take that extreme step unless it is an acute emergency.