The new employee’s EPF contribution rate of 8% in place of the regular 11% has drawn flaks and criticisms from many different quarters.

Cuepacs, FOMCA, Malaysian Employer’s Federation (MEF) and MTUC (Malaysian Trade Union Congress) have all issued strong statements against Deputy Prime Minister, Datuk Seri Najib Tun Razak’s announcement, indicating their concern on the employees’ pension welfare.

In the argument, the reduction should be given as a voluntary option, and not automatic or mandatory as it is being exercised. In the new implementation, unless members fill up Form KWSP 17A (AHL) to maintain their current contribution of 11%, this new rate will be applied automatically beginning of January 2009. The form can be obtained from any of the EPF branches, or downloaded from EPF website from December onwards.

Cuepacs has some 40,000 members who are under EPF statutory and its President Omar Osman wants all of them to opt out of the move and maintain their contribution at 11%. As a rough calculation made for an average worker found out that the person only has between RM120,000 to RM160,000 upon retirement, a further 3% reduction will potentially be catastrophic for the pensioner.

The decision to reduce the EPF contribution rate was part of the government’s stimulus package for the economy and was announced on 4 November by the Deputy Prime Minister. The same move was made on 2001 and 2003, each done for a period of 1 year. With the latest cut, a worker will get a higher disposable income but will shrink his retirement fund by 3%.