30 January 2016

[EPF Revised 2016 Contribution] 8% or 11% better ???

One of the much talked about topic of the day when our PM revising the 2016 Budget again just after 3 months from tabling it late last year, the EPF contribution of employees will be reduced by 3% to 8% (from current 11%).

The new revised rate which will take effect for the period between March 2016 till December 2017, was to put more money into your own pocket, and hoping that you will spend it to rejuvenate the half dead economy. By doing so, you're contributing to the economy and back to the coffer of government via GST.

What do you think ?
Sounds good, if you really want to loosen abit your cash flow. Anyway, it won't make a big difference either. For example, if you're earning RM3,000 salary monthly, the 3% extra pocket money was RM90 only. Spending it on a lavish dinner?

"However, from tax planning perspective, we must not forget that our EPF contribution entitles you for up to Rm6,000 tax relief (EPF + Life Insurance premium). In other words, lesser EPF contributions means lesser tax relief for you," said Alex Yeoh, a licensed financial planner.

In the end, you maybe will need to pay more tax to the government. It was like a sure win measure by the government.

Meanwhile, it will affects all unit trust consultants whom focusing their sales on EPF's members investment scheme. Lesser EPF money means lesser amount can be withdrawn for such purpose, resulting lesser sales amount for consultants.

Can I maintain the current 11% contribution rate ?

Yes, you may do so by filling up the KWSP17A (khas 2016) form, which is the "Notice to Contribute more than statutory rate" and submit to respective employers, who will then forward it to any EPF branches. The form can be download from EPF website starting 2nd Feb 2016.


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