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.

http://www.thestar.com.my/news/story.asp?file=/2009/1/19/nation/20090119164214&sec=nation

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.

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%.

EPF (Employee Provident Fund) members who would like to get in touch with the EPF office will need to call the new call center number, which is (03) 8922-6000 effective Monday 30 June 2008.

The call center is one of the most popular means of communication between the members and the EPF customer service officers, with over four million calls recorded in 2007, tripled the number of calls received on the previous year.

Calls can be made for inquiries regarding membership number retrieval, withdrawals, contribution, obtaining the nearest office address and other corporate information regarding EPF. The customer service officers attending the call, however, will not be under obligation to reveal any financial or non-confidential information to its members.

The EPF or KWSP (Kumpulan Wang Simpanan Pekerja) is a compulsory statutory contribution program applicable for private employees and non-pensionable staff through management of their income in an reliable and efficient manner.

The fund can be withdrawn progressively after they reach 55 years old and beyond, while 30% of the fund, which is kept under a separate account (Account 2), can also be withdrawn for a number of purposes, including paying for the house down payment or education fees.

The call center line is open from 8.15am to 5.15pm from Monday to Friday.