Written by: Nova Lui 11/6/2008 10:52 AM
Beginning from 1 January 2009, EPF contributors can voluntary reduce their EPF contribution from 11% to 8%. This is part of the stimulus package to encourage spending for investors/contributors. On secondary, KWSP do not have the enough resources to manage our resources. Let weight the right/wrong and good/bad for EPF contributors and economy. For Economy Pros Cons More money spend into the market thus encourage economy activities (estimated that RM4.8bil a year will be freed up for spending in the economy if all EPF contributors opt for the rate cut.) Risk of increasing inflation. Current inflation is 8.2% For EPF Contributor Pros Cons More disposable income to meet daily needs Less contribution into retirement fund, thus higher risk of not being able to achieve required fund for retirement Use additional disposable income to pay more expensive loan (eg credit card) EPF dividend in 2007 which is a very good year is 5.8%. Thus we expected 2008 to have much lower dividend. Credit card rate is effectively 20%, thus it makes more sense to forgo the possible dividend to pay credit card which interest charges is almost 20%. Less income tax deductable expenses. (Maximum of RM6000 combining EPF and insurance expenses). Monthly Income X 12 Months X 8% = RM6000 – Insurance Premium Eg : If your insurance premium is RM3000, Monthly Income = (RM6000-RM3000) / (12X8%) = RM 3125 Thus for employee with income of less then RM3125 ( Insurance Premium of RM3000) thus he/she will not be able to fully utilize the tax deduction benefit For contributors whom are cash tight, its good opportunity to gain more free cash flow Conclusion – I have read article saying that this is good while some condemn it. I guess food for one is poison for another. Thus referring to above’s justification, depends how strong is your financial cash flow during this tough economy slow down. Question To Ponder: I revisited their logo and saw the moto "Saving For Old Age". Sigh.... is it true that's what they really do? Saving For Old Age or Saving The Economy? Or is it just a fund for government to utilise in achieving their own objective? KWSP lend RM5billion to ValueCap Sdn Bhd to gain confidend and increase investment sentiment in Malaysia. Now KWSP encourage contributor to spend more during slow economy.
Conclusion – I have read article saying that this is good while some condemn it. I guess food for one is poison for another. Thus referring to above’s justification, depends how strong is your financial cash flow during this tough economy slow down.
Question To Ponder: I revisited their logo and saw the moto "Saving For Old Age". Sigh.... is it true that's what they really do? Saving For Old Age or Saving The Economy? Or is it just a fund for government to utilise in achieving their own objective? KWSP lend RM5billion to ValueCap Sdn Bhd to gain confidend and increase investment sentiment in Malaysia. Now KWSP encourage contributor to spend more during slow economy.
4 comments so far...
Re: Voluntary to Cut EPF Contribution - Should I? In the long run, the employee's the losing end if you calculate the total given to employee.
Re: Voluntary to Cut EPF Contribution - Should I?
In the long run, the employee's the losing end if you calculate the total given to employee.
Re: Voluntary to Cut EPF Contribution - Should I? Today I read about this cut, and one article's idea was to calculate taxable income if we pay 8% and 11%. The article said there will be much difference for those salary above 4k. Please do the calculation for us. TQ slave
Today I read about this cut, and one article's idea was to calculate taxable income if we pay 8% and 11%. The article said there will be much difference for those salary above 4k. Please do the calculation for us. TQ slave
Re: Voluntary to Cut EPF Contribution - Should I? Hi Slave Jen Tze,You can use the formula written in this article:-Monthly Income X 12 Months X 8% = RM6000 – Insurance PremiumEg 1: Monthly Income= ? , Insurance Premium=0Therefore to fully utilise the tax benefit, your income has to be :-= RM6000 / (12 X 8% ) = RM6250In a nutshell, if you do not have any life insurance and your salary is below RM6250 then it will make a different in your tax benefit.
Hi Slave Jen Tze,You can use the formula written in this article:-Monthly Income X 12 Months X 8% = RM6000 – Insurance PremiumEg 1: Monthly Income= ? , Insurance Premium=0Therefore to fully utilise the tax benefit, your income has to be :-= RM6000 / (12 X 8% ) = RM6250In a nutshell, if you do not have any life insurance and your salary is below RM6250 then it will make a different in your tax benefit.
Re: Voluntary to Cut EPF Contribution - Should I? I plan to keep at 11%
I plan to keep at 11%
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Benchmark Topic: How To Design A Lousy Unit Trust Funds But Can Out Perform Benchmark.
Investing in a unit trust with an instant return of up to 32% ??
Selecting a good unit trust fund... how to evaluate beside the awards they got and the past returns?
Return of the fund is not return of investors... understand the pricing strategy of unit trust products
The car sales man said the car loan interest is only 2.38% but my financial planner said is actually 5%... who is telling the truth?