The 9% monthly contribution rate for the Employees’ Provident Fund will end on June 30!
Finance Minister Tengku Zafrul stated last year during the release of the 2022 Budget that the 9% employee provident fund contribution rate measure was extended by six months from December 31, 2021 to June 30, 2022.
This also means that if the government does not extend the 9% contribution rate again, wage earners will have to pay 11% monthly to the EPF starting from July 2022. It is generally expected that economic activities in the country have been fully opened up and it is unlikely that the government will extend the 9% rate again.
So how big is the difference between the 9% and 11% contribution rate? Here is an example of a monthly salary of RM4,000. At 9% rate, you will have to contribute RM360 per month and at 11% EPF rate, you will have to contribute RM440 per month, the difference is RM80.
In other words, after the EPF contribution rate is restored to 11%, a wage earner earning RM4,000 per month will have less disposable income of RM80 per month, which will be deposited in the EPF account.
11% Contribution Rate
Benefits: You will have more pension after retirement. Enjoy higher EPF payout than time deposit every year. Not only that, members can also enjoy higher personal income tax deductions.
Bad: EPF savings must be withdrawn in full after the age of 55. If you want to withdraw before the age of 55, you have to apply to the relevant authority.
9% contribution rate
Benefit: More cash to spend on daily needs. Members can also invest the 2% less they contribute in higher yielding investments.
Disadvantage: When you retire, you will have less pension. The 2% reduction in contributions will not be eligible for the interest paid by the CPF Board. The personal income tax deduction will be less.
