The question of how Muslim EPF members should treat dividends arising from Simpanan Konvensional has become increasingly relevant since the introduction of Simpanan Shariah in January 2017.
The issue is not whether EPF savings themselves are automatically regarded as impermissible. Rather, it concerns the source and composition of investment income generated within the conventional portfolio.
EPF explains that the Simpanan Konvensional portfolio contains investments that are both Shariah-compliant and Shariah non-compliant. The latter include, among other instruments, investments involving riba such as certain Malaysian Government Securities, bonds and companies involved in conventional financial activities or using conventional financial instruments beyond applicable thresholds.
Accordingly, the Shariah question arises when a Muslim member receives a dividend generated partly from such investments.
A common misconception is: "If I have RM100,000 in conventional EPF, 60% of my RM100,000 is non-Shariah compliant." That is not what the 60% figure means.
The cleansing percentage applies to the dividend, not directly to the member's accumulated principal or total EPF balance. EPF describes the conventional portfolio as containing both Shariah-compliant and non-compliant investments. Consequently, only the portion of dividend attributable to the non-compliant investments is identified for cleansing.
The distinction can be represented by separating a member's EPF savings into its component parts:
- Contributions
- Accumulated savings
- Dividend
This distinction is fundamental in Islamic financial planning.
For the 2025 financial year, EPF states that 60% of the dividend credited from Simpanan Konvensional is the amount to be cleansed. The 60% figure reflects the percentage of Shariah non-compliant investment income in the Simpanan Konvensional portfolio for that year.
It therefore should not be interpreted as:
- 60% of the member's EPF savings being haram
- 60% of the member's contributions being haram
- 60% of the EPF portfolio being entirely non-Shariah compliant
- 60% being an additional zakat rate
It is a dividend cleansing percentage. EPF's own example is straightforward:
EPF currently publishes the following rates:
| Dividend Year | Cleansing Rate |
|---|---|
| 2017 | 64% |
| 2018 | 68% |
| 2019 | 71% |
| 2020 | 69% |
| 2021 | 69% |
| 2022 | 73% |
| 2023 | 66% |
| 2024 | 61% |
| 2025 | 60% |
There is no cleansing rate for 2016 and earlier under the current EPF guidance because Simpanan Shariah was not yet available as an option. EPF's Shariah Advisory Committee has taken the position that members did not previously possess haq tasarruf, the choice or control to have their savings managed under Shariah principles.
The trend should not, however, be interpreted as an indication that the EPF conventional portfolio is progressively becoming "more Shariah compliant." The annual percentage is a calculation reflecting the relevant year's investment-income composition and should be treated as a year-specific figure.
The underlying principle cited by EPF is the resolution of the 87th Muzakarah of the Fatwa Committee of the National Council for Islamic Religious Affairs Malaysia.
The principle is that wealth obtained through means that are not recognised as Shariah-compliant, including riba, gambling, fraud, corruption and similar prohibited sources, should not be used for personal benefit and should instead be disposed of through appropriate channels.
The Malaysian Islamic finance literature describes such wealth as including income from activities such as riba-based transactions, conventional bonds and non-Shariah-compliant securities. It discusses disposal through the maslahah (public benefit) of Muslims or to the poor, where the rightful owner cannot otherwise be returned the property.
Assume the 2025 Simpanan Konvensional dividend is RM10,000, with an applicable cleansing rate of 60%. Therefore:
Suppose a member received the following dividends:
| Year | Dividend | Rate | Cleansing Amount |
|---|---|---|---|
| 2022 | RM8,000 | 73% | RM5,840 |
| 2023 | RM9,000 | 66% | RM5,940 |
| 2024 | RM10,000 | 61% | RM6,100 |
| 2025 | RM10,000 | 60% | RM6,000 |
| Total | RM37,000 | N/A | RM23,880 |
This illustrates why a member with a long history in Simpanan Konvensional should calculate each dividend year separately rather than simply applying the current 60% rate retrospectively.
The objective is not to obtain a personal financial benefit from the non-Shariah-compliant portion. EPF states that the amount may be contributed to:
- Baitulmal, for the general benefit of Muslims; or
- Eligible recipients such as the poor and needy.
Importantly, the member does not necessarily have to withdraw the money from EPF first. EPF states that cleansing may be carried out using:
- EPF savings that are eligible for withdrawal, if any; or
- Other financial resources belonging to the member.
This means that the cleansing obligation, or calculation, and the actual source of cash used to make the disposal are conceptually separate matters.
This is perhaps the most important distinction for Islamic financial planners.
| Aspect | Cleansing | Zakat |
|---|---|---|
| Purpose | To remove from personal use the portion of income attributed to Shariah non-compliant sources | An obligatory act of worship on qualifying wealth |
| Destination | Baitulmal or appropriate recipients such as the poor and needy | The prescribed asnaf |
| Nature | Disposition of non-Shariah-compliant income | Obligatory wealth purification subject to the applicable Shariah rules |
EPF expressly states that zakat and dividend cleansing are separate matters. Paying zakat does not substitute for cleansing the identified Shariah-non-compliant portion of a conventional dividend.
EPF's current guidance provides an important practical point. Where a member remains in Simpanan Konvensional, the member is advised to separate the amount requiring cleansing before determining the amount of savings subject to zakat.
This is different from treating cleansing as a form of zakat. The actual zakat treatment of EPF savings remains subject to the applicable rules of the relevant state zakat authority. EPF itself advises members to refer to their respective state authorities.
Simpanan Shariah was introduced in January 2017 as an option for members wishing to have their EPF savings managed according to Shariah principles.
From 1 January 2024, EPF implemented a full separation of the investment portfolios for Simpanan Shariah and Simpanan Konvensional. The Simpanan Shariah portfolio consists solely of Shariah-compliant investments, while the conventional portfolio continues to contain both compliant and non-compliant investments.
For a member who switches to Simpanan Shariah, EPF's current guidance states that cleansing applies to the Simpanan Konvensional dividends credited before the effective date of the member's Simpanan Shariah election.
A scholarly discussion should not present the Malaysian position as if there has never been any difference in interpretation.
The Federal Territories Mufti Department, in an earlier 2021 discussion, referred to the 2015 Muzakarah position and concluded that historical conventional EPF dividends received before switching to Simpanan Shariah did not require cleansing because members previously lacked haq tasarruf over the management of their mandatory EPF savings. The same discussion nevertheless explained how a member who wished to cleanse voluntarily could calculate and dispose of the relevant amount.
This is important because it demonstrates that the issue involves fiqh reasoning concerning ownership, control and necessity, rather than merely a mathematical calculation.
State-level religious authorities may adopt their own positions concerning zakat and the treatment of EPF savings.
For example, the Perlis Fatwa Committee, in its 2017 decision concerning EPF zakat, stated that conventional-account dividends should first undergo cleansing, after which the remaining amount would be subject to zakat. It also stated that Muslims should place their savings in Simpanan Shariah where they have the choice to do so.
This illustrates why planners should avoid presenting a single state-specific position as universally binding across Malaysia. A prudent planner should therefore state:
For an IFP or Shariah financial planner, the issue can be incorporated into the client's annual review process.
1. Identify the EPF Account
Determine whether the member is in Simpanan Konvensional or Simpanan Shariah.
2. Identify Historical Conventional Dividends
If the member has previously held Simpanan Konvensional, identify the relevant dividend years.
3. Apply the Correct Annual Rate
Do not automatically apply the current year's percentage to all historical dividends.
4. Calculate the Cleansing Amount
Dividend × applicable annual cleansing rate.
5. Document the Calculation
Maintain a year-by-year schedule for the client.
6. Determine the Disposal Channel
Refer to Baitulmal or an appropriate eligible recipient, taking into account the guidance of the relevant state authority.
7. Address Zakat Separately
After dealing with the cleansing component, assess zakat according to the applicable state rules.
8. Review Simpanan Shariah
Where the client has a choice and seeks Shariah-compliant management of future EPF investments, explain the Simpanan Shariah option and its implications.
Consider Ahmad, who has remained in Simpanan Konvensional. His dividends are:
| Year | Dividend | Cleansing Rate | Amount |
|---|---|---|---|
| 2022 | RM12,000 | 73% | RM8,760 |
| 2023 | RM13,000 | 66% | RM8,580 |
| 2024 | RM14,000 | 61% | RM8,540 |
| 2025 | RM15,000 | 60% | RM9,000 |
| Total | RM54,000 | N/A | RM34,880 |
The planner should not tell Ahmad that RM34,880 of his original EPF savings is non-Shariah compliant. Rather:
This is a much more technically accurate formulation.
The issue should not ultimately be reduced to a percentage. The percentage is merely the measurement mechanism.
The answer is not necessarily to "destroy" the money. Rather, the established Malaysian approach is to remove the individual's personal benefit from the non-compliant component and channel it towards an appropriate public or charitable purpose.
This reflects the distinction between earning halal wealth, holding wealth, and benefiting personally from non-Shariah-compliant income. That conceptual distinction is particularly important for Islamic financial planners because clients frequently encounter mixed-income situations beyond EPF.
EPF conventional dividend cleansing should be understood as a Shariah disposition mechanism, rather than as a tax, zakat or penalty imposed by EPF.
For 2025, EPF identifies 60% of Simpanan Konvensional dividend as the amount requiring cleansing under its published methodology. The percentage applies to the dividend, not to the member's entire EPF savings. Historical years have different rates and should therefore be calculated separately.
The amount identified for cleansing should not be retained for personal benefit and may be channelled through Baitulmal or appropriate eligible recipients such as the poor and needy. EPF also makes clear that cleansing is distinct from zakat.
For financial planners, however, the most important lesson is broader:
- EPF. Dividend 2025: Purification of Dividends for Muslim Members. Employees Provident Fund, Malaysia.
- EPF. Simpanan Shariah. Employees Provident Fund, Malaysia.
- Federal Territories Mufti Department. Irsyad Hukum Siri Ke-562.
- Fatwa Committee of the National Council for Islamic Religious Affairs Malaysia. Resolution of the 87th Muzakarah.
- Perlis Fatwa Committee (2017). Decision concerning EPF zakat.
- Zahidi Ahmad (2026). Cleansing EPF Conventional Dividends: Understanding the Shariah Treatment of Non-Compliant Investment Income. Emzek Academy Scholar Archive, Kuala Lumpur.