This morning I got asked by my wife, exactly what the reduction of the employees EPF contribution means; so here is a view from my side and how I would handle this tough choice.

Currently there are two parties that contribute to your EPF:

1. You as the EMPLOYEE
2. Your company as the EMPLOYER

Currently the EMPLOYER has a set rate of 12% each month, that MUST be sent to your EPF account.

In 2015 you as the EMPLOYEE would have 11% of your salary deducted.

In 2016, the government has decided to reduce the EMPLOYEE contributions down to 8%, hence you will end up with 3% more in your payslip each and every month.

As an EMPLOYEE, you actually have the option to fill in a form and elect to remain at 11% contributions and not have an extra 3% in your salary!

Below is the form that you will need to fill in and have processed. Unfortunately, when this article was written the website is down for maintenance, so we can’t provide a web link.

Form EPF 17A (Khas2016), Notice to Contribute More than Statutory Rate (Employee’s Share).

IS THIS A GOOD IDEA?

In my opinion I feel that most people should elect to fill out this form, you should not reduce your contributions; simply because many Malaysians do not have enough in their retirement to be self-sufficient and an extra 3% now in your hand, will not help you much in your daily life.

There is an increasing issue of people running out of money or having to have help from loved ones in later years.

The only reason to reduce your contributions, is if you do not trust the EPF or you feel that you can find a safer home for this money.

Many newspapers and articles online are saying that the main reason why the government has reduced this rate is to stimulate growth in Malaysia at its most needed time. This will also grow the GST income for the government in the short term and is a move to stabilize an already fragile economy.

CONTACT US

If you feel that you will be short in retirement and you want to look at saving some additional money towards your future, please contact us below on.

syeomans@farringdongroup.com

I hope you have enjoyed reading this post.

Stuart Yeomans

CEO

Farringdon Group

Kuala Lumpur : Malaysia

January has seen a continuation of the volatility that was seen in the third and fourth quarters of last year. However, despite substantial drops in the middle of the month, equity markets ended the period relatively flat.

Oil

Oil has experienced further drops across January, touching a low of $26.55 on WTI and $27.10 on Brent. Prices climbed back up substantially from these lows, to levels around $34 a barrel. However, this move upwards seems to be based on market speculation and we expect to see prices fall again in the near term. We believe that oil will bottom out in the mid 20’s, before rounding sharply in the second half of the year. While prices of $27 a barrel are below the marginal production costs for many wells, it is important to remember that these are prices of high grade crudes. Lower grade crudes that make up much of the world’s production, are trading at much lower prices. Last month North Dakota Sour Blend, was trading at a negative price of -$0.50. These low prices should mean that many wells around the world begin to shut down later this year, helping to restore balance to the market.

In addition to this, there is now talk from Russia about joining OPEC in making a 5% production cut. This offer has been rebuffed by OPEC members. However, it will be in all of their best interests to get a deal at some point. A 5% global production cut would see prices quickly move in the $80 a barrel range.

China

Data from China continues to weigh heavily on the minds’ of most markets. However, many underlying indicators such as house prices and car sales, seem to be indicating that the economy has returned to stronger growth. Other figures such as the Purchase Managers’ Index data, indicate recessionary pressures inside the country. It is hard to tell which sets of data are correct and this uncertainty is one of the principal reasons why the markets have experienced heavy volatility.

Outlook

The first quarter will remain volatile, however it looks increasingly unlikely that the world is headed into a recession in 2016. This should translate into higher values across all asset sectors by the end of the second quarter.

I hope you have enjoyed reading this post.

Stuart Yeomans

CEO

Farringdon Group

Kuala Lumpur : Malaysia