The monthly EPF contribution rate of 9% will end on June 30 and will return to 11% in July!
In order to give people more disposable income, the government announced during the epidemic a reduction in the monthly contribution rate to the Employees’ Provident Fund, from 11% to 7% and 9%. This measure was subsequently extended several times and will end on June 30, 2022.
With the outbreak of severe inflation in the country and the fact that many EPF members’ EPF savings have been significantly reduced after several EPF withdrawal schemes, it is unlikely that the government will extend the 9% contribution rate again.
How big is the difference between 9% and 11% contribution rate? Here is an example of a monthly salary of RM4,000. At the 9% rate, you would have to contribute RM360 per month and at the 11% EPF rate, you would have to contribute RM440 per month, a difference of 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Bad: EPF savings must be withdrawn in full after the age of 55.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.
