Retirement Schemes Have Contribution Limits But Here’s How You Can Save More

retirement contribution limits Malaysia

When it comes to retirement plans, many of us tend to rely solely on our Employees Provident Fund (EPF) to ensure that we can live comfortably when we retire.

The reality, however is that only 3% can afford to retire comfortably according to an EPF official in 2021, and that 48% of Malaysians under the age of 55 have critically low savings in their EPF, a statistic that was highlighted by EPF chairman Tan Sri Ahmad Badri Mohd Zahir during the International Social Wellbeing Conference (ISWC) in November 2021.

Clearly, most Malaysians need to contribute more to their retirement funds. However, you should also know that there are limits to how much you can contribute to retirement schemes.

Types of retirement schemes in Malaysia

Let’s take a closer look at the types of retirement schemes in Malaysia and the limits you can contribute to these funds.

Those who work for the government are covered by:

Meanwhile, private sector employees currently have two pension schemes available:

  • Employees’ Provident Fund (EPF). This is a mandatory scheme for all employed Malaysian citizens and permanent residents. It is a contribution scheme by both employers and employees.
  • Private Retirement Scheme (PRS). This is a voluntary investment scheme set up to help Malaysians save more for retirement through long-term investments.

Retirement contribution limits you should know

Generally, limits to retirement scheme contributions are set to prevent highly paid employees from benefiting excessively compared to the average wage-earner. The same goes for tax deduction limits, to ensure those with higher income do not stand to benefit more from their deductions.

However, contribution limits don’t apply to all retirement schemes in Malaysia. For example, public sector employees do not contribute to KWAP while LTAT does set a maximum limit of RM2,000 monthly for voluntary contributions.

In the case of EPF, there are annual limits that you are allowed to make through self-contributions schemes. The maximum amount for voluntary contributions, either through self-contribution, i-Saraan, i-Suri, or top-up savings contributions, is limited to RM60,000 per year.

EPF also sets limits on the mandatory contribution rates according to the employee’s citizenship status and income level.

Contribution rate
For Malaysians, Permanent Resident (PR) or Non-Malaysian (member before 1.8.1998)
Monthly Salary RateEPF members below age 60EPF Members aged 60 and above
RM5,000 and belowEmployee: 9%
Employer: 13%
Employee: 0%
Employer: 4%
PR, Non-Malaysian
Employee: 5.5%
Employer: 6.5%
More than RM5,000Employee: 9%
Employer: 12%
Employee: 0%
Employer: 4%
PR, Non-Malaysian
Employee: 5.5%
Employer: 6%

Contribution rate
For non-Malaysians registered from 1.8.1998
For all salary ratesEmployee: 9%
Employer: RM5.00
Employee: 9%
Employer: RM5.00

Source: EPF

Private Retirement Scheme (PRS), on the other hand, does not have any contribution limit.

One thing to note is that both EPF and PRS have a tax-deductible limit. For EPF, a non-public servant can have a maximum of RM4,000 tax-deductible while a public servant has a higher limit of RM7,000. Regardless of whether you are a public servant or not, PRS offers you a personal tax relief of RM3,000.

How can you increase your retirement contribution?

If you are fortunate enough to have reached the maximum contribution limit allowed by your retirement scheme, it doesn’t mean you can’t do more to increase your retirement savings. While EPF has set the minimum retirement savings target at RM240,000 back in 2019, most Malaysians today would need far more than that amount.

A good way to estimate how much you really need is to start with two-thirds of your final drawn income if you want to maintain your pre-retirement standard of living. For example, if your monthly income of your last working year is RM7,500, then you would need at least RM5,000 when you retire — unless you’re willing to downgrade or alter your lifestyle significantly.

There are other ways for you to catch up on your retirement savings besides mandatory contributions. You could opt to save more, which is generally good advice. But, of course, if you want to grow your retirement portfolio at a greater rate, you might want to look at investing in unit trusts or PRS.

Principal Asset Management’s goal-based solutions can help you grow your retirement portfolio further.

EPF i-Invest: If you have already maxed out your contribution limit, consider diversifying your EPF savings in approved Unit Trust funds with Principal.

PRS: Contribute more to your retirement fund with this voluntary scheme, which does not have a limit and helps you complement your mandatory retirement savings.

Unit Trust: Principal has a range of funds to help investors diversify their portfolios based on their risk tolerance.

Be comfortable in your golden years through Principal

Being able to retire comfortably has become a harder task for many Malaysians. If you want to be able to enjoy your golden years, you need to start looking at how you can contribute towards your retirement funds.

Principal understands that the road towards financial retirement can be difficult to navigate. Which is why Principal’s goal-based solutions aim to help you take control of your financial goals and let you live your best life.

Start your journey towards a comfortable retirement here with Principal Asset Management.


Investing involves risk and cost. You should understand the risks involved, compare and consider the fees, charges and costs involved, make your own risk assessment and seek professional advice, where necessary. Securities Commission Malaysia does not review advertisements produced by Principal. For full disclaimer, please visit here.

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