MTUC: EPF-to-Pension Not Practical

The Malaysian Trade Union Congress, MTUC has come out strongly against the HR Ministry’s proposal to convert employee’s EPF saving into a pension scheme, saying it both not viable and impractical.

According to the body’s secretary general, G Rajasegaran, accumulated EPF savings, upon retirement, will not be able to fulfill a retiree’s monetary needs when it is given on monthly basis, rather than lump sum.

He quoted that, on average, majority of the seven million private employees in Malaysia who contributed to the EPF account have accumulated savings of only RM50,000 or less. If this RM50,000 were to be given on monthly for a period of 20 years, the retiree can only get a meager sum of over RM200 per month.

RM200 income per month for a typical Malaysian is hardly exciting. In fact, this would automatically enter the recipient into the category of poor citizens.

The Malaysian Employers Federation (MEF), on the other hand, takes the more reasonable approach by emphasizing that the employees should be given the rightful option on what they want to do with their EPF savings. In other words, they should be able to choose to get the money out in lump sum, or withdraw through monthly installment.

165 Companies Fined For Not Paying EPF

165 companies operating in Malaysia have been fined by the Employees Provident Fund (EPF) for their failure in paying monthly contribution to employees during the third quarter period of this year.

Failure of EPF remittance to the employees is an offence under the Section 43 (2) of the EPF Act 1991, with this round’s summon totaling RM219,010.

EPF contribution is compulsory for workers not entitled for pension. At the moment, contribution rate for employees stand for 11%, and employers 12%. Beginning January, the employee deduction will be reduced to 8%, and any employee wishing to maintain contribution at 11% can do so by filling up form KWSP 17A (AHL) and make the submission to their respective employer by this month. The form can be obtained from the nearest EPF branch or online at EPF’s official website.

Employees who feel they are not being remitted with the EPF contribution can complaint to the authorities, including the Labor Office, Public Complaints Bureau and the Ministry of Human Resource. They are also advised to check their EPF account regularly, which can be done by visiting the EPF office, through EPF smart kiosks as well as online, via EPF i-Account.

New EPF Rate Drawing Criticism

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%.

Worker Has RM120,000 in EPF After 30 Years

An average worker who works until 55 years old, spanning an approximate period of 30 years will accumulate about RM120,000 (US$38,900) saving in his EPF account.

The figure was tabled by the Deputy Finance Minister Datuk Seri Ahmad Husni Hanadzlah in the Dewan Negara yesterday.

Rough numbers had been used to come up with the approximation, and while RM120,000 would enable the retiree to meet his or her basic expenses, more should be done to safeguard one’s future expenditure.

EPF (Employee Provident Fund) contribution is mandatory for workers employed by organization which do not extend pension scheme for its workers. Currently, the min rate of monthly contribution is 11% for the employee and 12% for the employer.

Employee has option to increase his statutory contribution by making an arrangement with the EPF, while a number of employers in the country have been offering higher EPF contribution (between 13 to 15%) from their end as part of their effort to attract local talents working with them.

The mandatory EPF contribution is not applicable for foreign workers employed in Malaysia.