Do I want to take home my three percent now, or keep it in my EPF?
Actually, you don’t have to decide, the government has already decided on your behalf. Unless you fill in a form through your employers, you are considered to have agreed to have your personal contribution reduced from 11 percent to eight percent.
Every Malaysian with three percent more income with them. This of course means you don’t get to see that three percent compound over your working years – this is where I am stuck.
It is nice to have the three percent with you, after all it is your three percent.
The record by EPF in investing our money has been less than flattering over the years, and there are all types of funds you can put your money in.
The simple money
So for those earning RM1500, their income after EPF reduction will be RM1380 rather than RM1335 – so you get your RM45 per month.
For those earning in the lower brackets, the money will be spent.
Which helps, however the same immediacy for the lower group is prevalent in their retirement benefits planning. They earn less, so they need to save their smaller savings for a longer time to accumulate a meaningful safety nest.
The same RM45 is paid for a period of 20 years monthly, but with only interests being compounded quarterly, at 4 percent interest, you will get RM16,589.91.
That would mean something in 2029 – that RM45.
The current policy is only for two years so you can revert to a 11 percent payment rate in 2011. Still the point remains.
Encourage people with low disposable income to spend more of their savings now, then they will have a substantially less amount of money for old age.
The EPF management
The EPF has been known to prop government companies for the longest time, not the best way to protect contributors’ interest, and the money would probably earn more elsewhere.
For the upper-middle income group, such a clause is welcome. That you get to keep your money to invest better.
But for the lower income group, with income levels that don’t attract financial planners, then they are just about to receive a little extra of their own money now, and have substantially less in a time they don’t earn anymore.
The thinking might be, this is a problem for decades from now.
Yet with increasing costs of basic health care and housing, the low-income earner must wonder, what is his place in this country, and whether he or she and family have the real consideration of those in power.
EPF may have been run haphazardly in terms of accountability to those who make up the fund, but to a large number of Malaysians it is the only planned retirement benefits they have.
This new stimulus package and the money they put in your pocket today, may not be the magic pill after all.