Malaysia government allow EPF contribution minimum contribution to reduce from 11% to 8%. The lower contribution to EPF meant to help families cope the inflation and over come the global recession, so that they have more cash in the monthly budget.
The EPF reduction will apply automatically next year, for those who prefer to maintain their contibutions at 11% will need to fill-up KWSP 17A (AHL) through their respective employers. Or the may download it through KWSP website strating from Dec 2008.
KWSP 17A Form
You will still wondering whether you should cut the contribution stating from Jan 2009? Several matters or question you need to consider:
1) With lower contributions of EPF mean lower savings in your retirement account, how do you utilise the extra money?
2) For every RM1 less that you save in your EPF account, you stand the pontential to lose RM61 on retirement if assuming EPF pays 5% p.a dividend for the next 20years. Do you mind?
3) If assume, that you reduce the contribution and have extra RM50/month for the next 2 year you will get extra RM 1,200 but you will end up losing RM 3,050 for the next 20 years. Are you satisfy with that?
4) How much your EPF contribution per year? If your EPF contribution at 8% exceed RM6,000 per annum, then you can ignore this question. If you EPF contribution at 8% is below RM6,000, please take note for it.
Employees EPF contributions & Life Insurance are tax-deductible up to the combined limit of RM6,000 per annum.
If assume that your annual salary are around RM54,550.00 (RM 4545.83 per month) and without any other income & bonus. Then your EPF contribution at 8% is RM4364 while at 11% is RM6000 (round up figure).
And assume that, you do not have any further deduction beside personal relief RM 8,000 and eligible EPF contribution at the cap of RM 6,000.
If your EPF contribution at 8% your taxable income will be RM 42,186 and tax payable is RM2459.18, while at 11% your taxable income will be RM 40,550 and tax payable RM2246.50, and the difference tax payable is RM212.68 . With the extra RM1636 additional money in your pocket, you end up need to pay extra RM212.68, around 13% of the RM1636, since the tax bracket at 13%.
5) In short, if you are tax payer (eligible to pay tax after deduct all the tax deductable expenses), and your EPF contribution add up life insurance premium sum is below RM 6,000 , you may end-up pay more tax, depend on how much your tax bracket, the higher you are the higher tax you pay.
Will you still consider to lower your EPF contribution? Do you benefits from this government move? Government encourage us to spend, so spend as much as you can... Haha... Boost up our economy... ...
