Effective date for EPF Simpanan Shariah subject to yearly shariah fund allocation

The effective date for Employees Provident Fund (EPF) members wishing to switch their account to Simpanan Shariah is subject to the yearly allocation of the shariah-compliant fund.

In a statement to Bernama, EPF said the fund's yearly allocation is provided on a first-come first-serve basis and other conditions implemented by the EPF Board.

"The effective date is January 1 after the approved annual fund allocation for the year.

"When the total registration for Simpanan Shariah reaches the quota for the year, members who have chosen the account but failed to secure an allocation will have to wait for the next shariah savings fund allocation in the following year," it said.

The EPF statement was issued to disseminate information on its pioneer Simpanan Shariah account to contributors.

On Feb 22, EPF chief executive officer Datuk Shahril Ridza Ridzuan said EPF would launch the Simpanan Shariah account in January 2017 as an option for contributors interested in converting their savings to full shariah-compliance status, with an initial fund size of up to RM100 million.

EPF members will be notified via notice and short message service (SMS) to inform them that their application to choose Simpanan Shariah has been received and the effective date of their new account.

The notification will be made at least seven days before the effective date.

For members who are not receiving any notification on the effective date, they are either still on the waiting list or their contact details in the EPF system have not been updated.

According to EPF, members can only choose one type of account, either EPF's conventional fund or the Simpanan Shariah, and members need to be present at any EPF counter to make an application and verify their thumbprint for identification.

On the Shariah Advisory Committee (SAC), EPF said it was established by the EPF Board to ascertain and advise on shariah-related matters with regards to Simpanan Shariah.

"The SAC appoints no less than five members who are qualified in the field of shariah or possess shariah knowledge and experience in the aspects of banking, finance and law or any other related disciplines," it said.

The current five-member SAC is headed by its chairman, Prof Dr Mohamad Akram Laidin, who is also executive director of the International Shariah Research Academy for Islamic Finance (ISRA).

Its members are International Islamic University Malaysia (IIUM) Institute of Islamic Banking and Finance (IIiBF) lecturer, Assoc Prof Dr Aznan Hasan; IIUM Kulliyyah of Economics and Management Sciences Assistant Professor Dr Zaharuddin Abdul Rahman; IIUM IIiBF professor, Dr Engku Rabiah Adawiah Engku Ali and senior lecture at the Department of Shariah and Management, University of Malaya.

With regards to members' account, members will be able to access their Simpanan Shariah via i-Akaun, while the annual statement of account will remain the same.

The annual statement will indicate the member's account status and Simpanan Shariah effective date.

Members are not required to inform their employers if they opt for Simpanan Shariah.

As for employers, there will be no additional costs incurred by them if their employees wish to choose Simpanan Shariah.

However, all employers are subject to the existing rules and regulations on EPF contributions.

Employers are only required to complete Form A as per existing process and there will be no additional forms for employers to complete or changes to be made.

However, employers who default in their contribution payments will be imposed with the existing charges, namely dividend on late contribution and late payment charges.

On Simpanan Shariah withdrawal, members can use their eligible withdrawal to fund conventional housing loans and Islamic housing financing, subject to the housing, withdrawal terms and conditions.

While for funds transfer, members are still subject to the current process for fund transfers under the EPF Members Investment Scheme (EPF-MIS).

However, members who have chosen Simpanan Shariah and applied for a portion of their savings to be transferred to fund management institutions under the EPF-MIS will only be allowed to invest in shariah-compliant funds approved by the EPF.

On whether a unit trust fund managed by Amanah Saham Nasional Berhad (ASNB), including Amanah Saham Bumiputera 2 (ASB2) were shariah-compliant and whether members with Simpanan Shariah were allowed to invest in the unit trust, the EPF explained that members could refer to the respective fund management institutions and their appointed shariah adviser.

It is for any clarification on shariah compliance of the listed shariah- compliant unit trust funds as the Shariah Advisory Committee of EPF shall not provide any endorsement of the listed shariah-compliant unit trust funds.

However, the 80th Muzakarah (Conference) of the Fatwa Committee, National Council of Islamic Religious Affairs Malaysia had resolved that investment in ASN and ASB, including their dividend and bonus, is permissible.

Besides that, the medical examination to determine a members's level of disability by the EPF Medical Board is shariah compliant because the decision is subject to the EPF Regulations and Guideliness outlined by the EPF Board.

A payment for health withdrawal to a nursing home that is managed by a non-Muslim is also shariah compliant as the withdrawal is for paying bills and is not against shariah principles.

If members opt for Simpanan Shariah, the EPF is not obliged to purify the dividend on savings for all members based on the decision of the Muzakarah Khas (Special Conference) of the Fatwa Committee, National Council of Islamic Religious Affairs Malaysia held on Aug 18, last year.

However, if they wish to purify the dividend individually, they may do so upon withdrawal of their savings at age 50 and 55 years by referring to dividend purification guidelines formulated by the EPF's Shariah Advisory Council (SAC).

According to EPF, the nomination policy for Simpanan Shariah will remain the same, including nominee(s) for Muslim members who will act as administrator (wasi) responsible for distributing the savings in accordance with the Islamic Law of Inheritance (Faraid) in line with the decisions made by the Fatwa Committee, National Council of Islamic Religious Affairs Malaysia at the 49th Muzakarah on Sept 10, 2000.

As for zakat (tithe), EPF will not pay zakat on members' savings with the EPF, including the dividends, as Muslim members do not have perfect ownership over their EPF savings which is one of the mandatory requirements of paying zakat.

The conditions of perfect ownership will only be fulfilled upon withdrawal of EPF savings by members who have the absolute freedom to utilise the savings with no restrictions.

Therefore, Muslim members are obliged to pay zakat if their withdrawn EPF savings meet the 'nisab' (minimum amount) and 'haul' (in possession for one lunar year) requirements.

Nevertheless, Muslim members are encouraged to pay zakat immediately upon withdrawal if the 'nisab' has been fulfilled even without meeting the one-year 'haul'.

This is in line with the decision of the Fatwa Committee, National Council of Islamic Religious Affairs Malaysia during the 5th Muzakarah on Feb 16-17, 1982 and 74th Muzakarah on July 25-27, 2006.