5th August 2022 - 2 min read
The Malaysian Trades Union Congress (MTUC) has urged the government to allow employees the flexibility to choose whether they wish to maintain their Employees Provident Fund (EPF) contribution rate at 9% until the end of 2022, or revert back to 11%. This is as many are still struggling financially amidst the rising cost of living and higher loan interest rates.
The call by the MTUC came after the EPF contribution rate for employees was recently restored from 9% back to 11%. To clarify, the government had lowered the EPF rate to 9% throughout the whole of 2021 to increase the disposable income of members during the height of the Covid-19 pandemic. Extended until mid-2022, the rate was eventually restored back to the original 11% in July.
According to the president of MTUC, Effendy Ghani, allowing EPF members to retain the 9% EPF contribution rate until the end of 2022 will give them some space to revise their financial plans. He added that the extra take-home pay will also help them cope with the increasing cost of living.
Effendy also proposed that those who wish to retain the 9% contribution rate should be made to apply for it. This is in order to prevent any potential abuse.
With regard to concerns that a lower EPF contribution rate will affect members’ retirement funds, Effendy commented that employees in the private sector are typically entitled to annual increments. This, he said, could help them cover for the reduction in their retirement savings.
“Private sector employees usually get a raise at the start of every year, so if they can postpone (increasing their [EPF] contribution to 11%) until December, their financial situation will stabilise from January,” Effendy explained.
Meanwhile, several economists have recently applauded the return of the EPF contribution rate to 11%, saying that the government should not lower the EPF contribution rate again. This is to ensure that the members will be able to have adequate savings for their retirement and to cope with higher expenses in the future.
(Source: Free Malaysia Today)
Subscribe to our exclusive weekly newsletter and we’ll bring you the week’s highlights of financial news, expert tips, guides, and the latest credit card and e-wallet deals.
Stay tuned for what’s to come next in the personal finance world