Using EPF Account To Invest In Unit Trust

Using EPF Account to Invest in Unit Trust: What You Need to Know

Many Malaysians are unaware that a portion of their EPF Account 1 savings can be used to invest in unit trust funds. When used correctly, this option can help diversify retirement savings and potentially enhance long-term returns — while still keeping EPF as the core foundation.

This article explains how EPF Account 1 investment works, who it is suitable for, and the key rules you should understand before making any decision.

What Is EPF Account 1?

EPF contributions are split into two main accounts:

Account 1 (70%) – For retirement purposes

This portion is largely locked in and meant to grow for long-term retirement.

Account 2 (30%) – For pre-retirement needs

Can be used for housing, education, medical, and certain approved purposes.

EPF Account 1 is designed to grow steadily through EPF’s declared dividends. However, EPF also allows members to invest part of Account 1 into approved unit trust funds under a regulated framework.

What Is the EPF Members Investment Scheme (MIS)?

The EPF Members Investment Scheme (MIS) allows EPF members to invest a portion of their Account 1 savings into EPF-approved unit trust funds managed by licensed fund management companies.

The objective of MIS is to:

• Provide diversification beyond EPF’s portfolio

• Allow members to participate in market growth

• Enhance long-term retirement outcomes

• Importantly, this is optional, not mandatory.

• How Much Can You Invest from EPF Account 1?

• Not all of Account 1 is investable.

  
  

Under EPF rules:

• You can invest up to 30% of the amount exceeding the Basic Savings threshold for your age

• The investable amount depends on your age and Account 1 balance

This structure ensures members maintain sufficient retirement savings within EPF before investing externally.

Where Can You Invest Your EPF Money?

EPF Account 1 can only be invested in:

• EPF-approved unit trust funds

• Funds managed by approved fund management companies

• Distributed through authorised institutions (banks, unit trust consultants, platforms)

These funds are regulated by:

• Employees Provident Fund (EPF)

• Securities Commission Malaysia (SC)

This ensures investor protection and governance.

Key Rules You Must Understand:

1️⃣ Investment Is Long-Term

Funds invested via EPF Account 1 are meant for retirement, not short-term trading.

2️⃣ No Cash Withdrawal

You cannot withdraw cash directly. Proceeds are subject to EPF rules and generally returned to EPF upon redemption.

3️⃣ Market Risk Applies

Unlike EPF dividends, unit trust investments:

• Are not guaranteed

• Can fluctuate with market conditions

Require appropriate fund selection based on risk profile

4️⃣ Fees Matter

Unit trust funds involve:

• Sales charges (often capped or discounted)

• Annual management fees

Understanding cost structure is crucial for long-term performance.

Who Is EPF Account 1 Investment Suitable For?

This strategy may be suitable if you:

• Have sufficient EPF savings above the basic threshold

• Have a long investment horizon (10–20 years)

• Understand market volatility

• Want diversification beyond EPF

It may be less suitable if you:

• Are nearing retirement

• Are uncomfortable with market fluctuations

• Have limited EPF balances

Common Misconceptions

❌ “EPF money will be lost if market drops”

✔ Long-term investing allows recovery across market cycles

❌ “This replaces EPF”

✔ EPF remains your core retirement pillar

❌ “Higher return is guaranteed”

✔ Returns depend on market performance and fund choice

Final Thoughts

Using EPF Account 1 to invest in unit trust is not about chasing higher returns — it is about strategic diversification.

When used appropriately:

• EPF continues to provide stability

• Unit trust investments provide growth potential

Together, they strengthen long-term retirement resilience

At NexGen Financials, we believe retirement planning should be structured, need-based, and aligned with long-term dignity and confidence.