‘Say no to lower EPF contribution’

PETALING JAYA: The Malaysian Trades Union Congress (MTUC) has advised employees to reject a proposal to reduce EPF (Employee Provident Fund) contributions from 11% to 7%.

On the other hand, financial planners and economists feel the extra cash could be beneficial if spent on essentials or is invested properly.

The reduction, which was proposed in a RM20 billion stimulus package announced by former prime minister Tun Dr Mahathir Mohamad last week, is slated for April to December.

The package is to address the economic slowdown resulting from the Covid-19 outbreak.

MTUC president Datuk Abdul Halim Mansor (pix) told theSun the proposal was like asking employees to bear the burden of addressing the economic slowdown when many of them still do not have enough savings for retirement.

“The government should instead offer them an allowance to help them through this lean period,” he said.

He added the government should ask employees first if they want the reduction to be implemented.

“Give them a choice to opt in rather than opt out,” he said.

Abdul Halim recalled that in the early 2000s when a similar scheme was implemented, many employees did not even know that their EPF contributions had been reduced.

Felix Neoh, director of financial planning at Finwealth Management, said those who can afford their monthly expenses should maintain their contributions at 11%.

“But if you have been covering your expenses with credit card debt or personal loans, then it is a good idea to take the reduction,” he said.

He said it may be beneficial to use the extra money for alternative investments that can bring better returns under reasonable costs.

“But that would depend on how disciplined the individual is in keeping track of his spending,” he added.

Economist Prof Dr Barjoyai Bardai advised against taking the reduction, saying that parents should save every bit of money for their children’s education and healthcare.

However, he said they can opt to invest the extra money in the National Education Savings Scheme.

Economist Prof Dr Yeah Kim Leng said that while employees should be mindful of their retirement savings, the extra cash could be used for training and reskilling.

“With new skills, there will be greater opportunities to find better paying jobs and thereby raise their income,” he said.

“This will lead to a virtuous cycle to boost the standard of living of the low and medium-income group. It will then enable them to spend more and further contribute to economic growth.”