M.Krishnamoorthy
A media coach, adjunct professor and author
The government will save on not paying pensions, and the new employee will benefit more. When he retires, the employee who opts to contribute to the Employees Provident Fund (EPF) will have significant savings.
KP Bose Dasan, who once worked with the Inland Revenue Board (IRB), said: “The introduction of EPF to new employees is more economical and removes the burden from the government. The Government will also be flushed with cash within two years by implementing a capital gains tax, a tax on foreign source income and an increase in SST from 6% to 8%.”
He cited a simple example by his friend Kesavan, who posted it on social media.
Bose, a tax and personal finance consultant who pioneered in financial planning, said Kesavan was making a case for contribution to EPF. “He challenged the old belief that government pensions are the best.” Kesavan illustrated a comparative case of EPF vs Pension.
For example, Ahmad receives a pension, and Ah Chong receives EPF contributions.
Assumptions: Average salary of RM 4,000 a month. 30-year time horizon.
EPF contribution at 11%(employees contribution) +13%( employer’s contribution) = 24%
Estimated EPF compound rate 5%p.a. Pension of RM 2,400 per month (3/5 of RM 4,000 of last drawn salary).
Retirement period is 20 years. FV (Future Value) of EPF = RM 765,375
Pension Value = 2,400 x 12 x 20 years = RM 576,000.
The most significant point offered and agreed upon is at age 60.
“Ah Chong gets a capital sum of RM 765,375, and Ahmad has no capital, just a monthly income of RM 2,400 to look forward to,” said Bose.
Kesavan stated that the options open to a capital sum were multi-fold – take a vacation, reinvest, including in EPF, and support family significant commitments.
Freelance Writer M. Krishnamoorthy (www.imkrishna.net) is a media coach, adjunct professor and undercover journalist. He has freelanced with Bernama, NST, The Star, and Malaysiakini. He also freelances as a fixer/coordinator for CNN, BBC, German and Australian Television networks and the New York Times. As an undercover journalist, he has highlighted society's concerns.
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