While reading newspaper yesterday, I noticed the following news with header that shouted “EPF down from 11% to 8%”.
PETALING JAYA: Employees can choose to reduce their EPF contributions to increase their disposable income next year.
The Government has allowed employees to reduce their contributions by three percentage points from 2009 to 2011.
Presently, the employer’s EPF contribution is 12% while employees contribute 11%.
“With the reduction, the total contribution is still at a reasonable rate of 20%, which is 12% from the employer and 8% from employee,” said Deputy Prime Minister Datuk Seri Najib Tun Razak.
Najib, who is also Finance Minister, said if all contributors chose to reduce their contributions, it would come up to RM4.8bil annually.
“Assuming that only 50% of contributors take up the option, private spending is expected to go up by RM2.4bil,” he said.
“A person earning RM2,000 could gain an extra disposable income of RM60 monthly, while one earning RM6,000 will have an extra RM180 to spend.”
On the RM5bil fund injection into government investing agency Valuecap to stimulate capital market activity, Najib said similar moves had been implemented in other countries such as the Tracker Fund in Hong Kong in 1998, and recently by Qatar Investment Authority and the largest pension fund in Korea.
“The extra fund is acquired from EPF loans which is guaranteed by the Government. Therefore, the loan does not only guarantee higher returns compared with deposit rates from banking institutions but is also a minimum risk investment to EPF,” he said.
But, some workers’ unions felt that savings will be reduced and it will affect the people’s retirement funds.
National Union of Bank Employees (NUBE) secretary general J. Solomon said he hoped that the voluntary offer was only for the time being during the economic crisis.
MTUC president Syed Shahir Syed Mohamud said that reduced savings would not benefit contributors.
“When savings go down it will be followed by a decrease in dividends.”
[Source here]
Hmmm.. so for a person who earns RM 6,000 per month will be able to take home RM 180 extra for that 3% reduction in EPF contribution. Hurray! That’s like I can pump my petrol twice extra per month! Hurray! That’s like I can buy one more shirt!
See, that’s another short-sighted policy from our beloved government.
Let’s be honest, not many people will make RM6,000 and if they are in that income group, they would be comfortable. And for those who earn RM 2,000, they are only taking back RM60 from the reduction, so does it make sense? What can RM60 do? A full tank of petrol for Perodua Kancil will cost more than that (of course, those government people won’t know since their cars are provided and the petrol is fully provided, so they might not even know how much it is to pump a full tank for their cars). So what problem does it solve but to let people have that extra RM60? That’s like RM2 per day, so how is that going to spur the economy in any scale?
How about creating something more long-sighted? How about reducing the import tax for automobile so that we don’t have to pay so much in our loan repayment to the bank? How about removing the toll for our highways? (By the way, don’t get me going about the highways. We are paying tolls but the road condition is horrendous) How about upgrading the public transportation so that people can travel around with ease and not needing to purchase a car? (To be honest, without a car in KL/PJ area, its not that easy to survive. But try that in Singapore and you’ll find that you don’t really need a car)
For lower income group, I don’t see how this reduction in EPF contribution is going to help. Maybe in the short term that these people can do a bit more, like having lunch twice a week or something. But in long term, it will have dire effect because we are facing inflation and aging generation. When a person retire, they have to have as much as they can in their retirement fund in order to survive. With a reduction, let’s say for 3 years, that’s RM2,160 (that’s RM 60 x 12 x 3) less before any interest gain, and in longer term, it will make a big impact.
So if any of you so-called politicians are reading this, please remember this:
We elected you into the office, and you are suppose to provide long-term growth for the economy and help the people. If you really want to spur the economy of the country, please do something more constructive than being just superficial, like reducing the import tax, eliminate the corruption so there’s no wastage in public fund (i.e, our hard earn money), stop wasting money on mega projects that we don’t really need, and provide a long-term investment strategy for the country.



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