From January 2008 to December 2009 and March 2016 to December 2017, the EPF contribution rate reduced to 8% from 11%.
As for the employer contribution, there are no changes.
During those periods, the employee who wishes to maintain their EPF contribution rate at the current 11% can opt to fill in a special form, Form KWSP 17A (AHL).
EPF contribution 11% or 8% is better?
When the news was announced in November 2008, there were many voices and opinions on the EPF 3% cut.
Some were happy with the 3% cut as they can use the 3% to cover their cost of living. While some were not happy because they prefer to better prepare for their retirement.
Personally, I prefer to maintain my EPF contribution to 11%. These are the reasons why I am not supporting the EPF 3% cut:
- Less taxable income – Higher reduction means less taxable income. So, I pay less income tax.
- A bigger retirement fund – 3% x 12 months x 2 years can grow into quite a substantial amount over the years.
- Higher yearly dividend – Average 5% dividend x (3% x 12 months x 2 years) can make a difference in my retirement fund.
The troublesome part would be I had to fill in Form KWSP 17A (AHL) to indicate that I choose to contribute more than the statutory contribution.
Nevertheless, the decision was a wise one. Because a 3% difference in terms of contributions can make quite a difference over the years.
Especially for those who still have many years before reaching their retirement.
Those who would like to know about the pros and cons of the 3% cut can read my sharing on the advantages and disadvantages of the EPF 3% cut.
Does Malaysian opt for EPF 8% or 11%?
According to FreeMalaysiaToday, on 9 August 2016, the then Second Finance Minister said 50% of EPF members opted to maintain their contribution rate at 11%.
While the remaining 50% opted to reduce their contribution to 8%.
Personally, it is great to know that 50 of 100 Malaysians care for their retirement fund.
Final thoughts
How about you? During those periods, do you agree with the EPF contribution rate being reduced to 8%? Or, do you prefer an 11% contribution?
And for your decision, do you mind sharing the reasons behind it?
Lastly, let’s keep building our retirement fund!
