Stats are often used when you don't want to reveal the whole picture.

"Basic Savings" is related to Account 1. Is Account 2 convenient left out? Also in that sentence in the above linked article, it is in reference to 'active' contributors. So are we assuming that 'non-active' contributors have less? Maybe most non-active contributors stopped being 'active' because they had already build up a big nest egg.

What contributors have in EPF at age 55 years do not show their entire wealth... most already cleaned out and reduced their EPF savings at age 50, and also Account 2. And Account 1 can also be reduced by withdrawing for investments into mutual funds.

BTW like it or not, EFP is a mutual fund - albeit a compulsory one. The CEO should be more concern about running it. How much a contributor has in it is not within his area of concern and responsibility, leave this to the politicians.

If he is concern about not being able to give a reasonable yearly returns, because the fund has had grown hugemongous in size and some of the monies have to be put into long term investments with very low or almost zero returns in the short term, then there is an alternative...

(When a fund is that big, all its financial moves are being watched by all parties... "Ringgit drops most since January on EPF property plan". - See more at: http://www.themalaymailonline.com/money/ar...h.GDH8smEr.dpuf

The alternative: Consult the public whether to open up this category of 'compulsory retirement mutual fund' and provide a level playing field to other PRS funds.

As I see it, it was the best answer to a stupid question when answer was an obvious "no".

I would even answer why don't they increase the age till 75 or 80. This way the savings will more probably outlast your life.

In any other corporations, when the CEO chooses to antagonize its customers, the Chairman and board of directors would be pressured by its stakeholders to remove the CEO.

EPF no need to talk and show off too much. Just give dividends at least 9% every year, then its members will die die keep their money inside EPF even if the full withdrawal age is lowered.

There was an issue regarding members above age 75 earning no interest. If not mistaken, there was an official policy or clause on this matter but EPF chooses to keep paying dividends. (Labour unions' reps on the board of director claimed no knowledge of this policy, and then all is fine and things quiet down when it was reveal that EPF did not stop paying dividends to members above age 75.)

Some questions remained unanswered:
1. How many of these above age 75 accounts are 'dead' accounts?
2. How long does a 'dead' account remained open before transferring to treasury/Bank Negara?
3. If it is true that EPF is still paying dividends to members above age 75, why does it ignores the policy? Do it has the authority to disregard any policy?

4. Wouldn't it be better to distribute these dividends to other members instead of giving to 'dead' accounts which will eventually transferred to Bank Negara?


And now the proposal to extend paying dividends to members till age 100! Can we know who in EPF made this proposal?

Just like the old story on why butter was losing out to margarine, and a market survey was conducted to find out the reason... when anyone, any child, man and woman, can tell that soft margarine is so easy to spread than butter when taken out from the fridge.

Nevertheless, the nation-wide market survey was still funded... Why? The simple reason was that the survey was funded by other people's money.

Same event, different headlines..."EPF set to be trillion ringgit fund."
https://www.thestar.com.my/business/busines...n-ringgit-fund/

“It will be very soon actually that we would be a trillion ringgit fund, so the real challenge is in the management of the money of our members,” he said yesterday.

He said that the EPF was growing at a strong rate with a net increase in its contributions of up to RM1.9bil per month.

“We have a problem which I think a lot of people would like to have: we are flushed with cash and are growing every month on a net basis increase of RM1.5bil to RM1.9bil.

I remembered it was 600 billion some years back, then 700 billion and this year it was above 800 billion...
....

“The total labour force in Malaysia that was covered under the EPF was about 48% when I first joined here five years ago.

“I had a look at the recent numbers and this has already come down to 40%. In a space of five years, it has already come down from 48% to 40%,” Alizakri said.

The lower coverage could be due to e-commerce or e-business where companies are farming out jobs and not hiring people as their own "employees". Or more people jobless and doing Grab?

“The total labour force in Malaysia that was covered under the EPF was about 48%[U] when I first joined here five years ago.

“I had a look at the recent numbers and this has already come down to 40%. In a space of five years, it has already come down from 48% to 40%,” Alizakri said.


The total labour force is about 15 million. (Total population is about 32 million.) Civil servants is 1.6 million or about 11% of the total labour force.

The 40 to 48% is surprising low... one would expects formal employees to be 70 to 80% of the total work force since the country had moved away from agriculture base to manufacturing, and the number of farmers and those in the fishing industry is not that large.

The other major industry is tourism but there are more hotel employees than those freelance tour guides and other type of work that are not formal employees.

Even if add all the informal workers who are non members of EPF, it is doubtful they could be more than the 1.6 million civil servants, even if disregarding that some civil servants can opt for EPF instead of pension scheme.

Have to go back to previous page to see where the misguided viewpoint comes from.

The flow of reason and thoughts is wrong.

Personal income tax is on the gross income earned. Epf contributions has tax relief, as like life insurance and donations. These tax reliefs have caps, epf previously at 6k, now at 4k.

Whether you choose to invest your savings into epf or elsewhere, it is the savings which is from your gross income that has been taxed.

Making any extra epf contribution doesn't increase the gross income, unless the taxpayer was hiding from lhdn and the high contribution alerts lhdn to some sources of undeclared income.

Read again the article. You have quoted it out of context. The writer was trying to show the effect of lowering from the tax relief even though the tax rates were lowered.

He was trying to show in some situations, some taxpayers would wind up with higher taxes even though the tax rate is lower by 1 or 2%, because the epf relief was now capped at 4k.

Since those in the middle to higher incomes group would easily exceeded 6k in their contributions, they now have 2k less to claim the relief, and the net taxable income is now higher by 2k.

Reversed or Pyramid tiered interest rate

Restructure the EPF dividend structure where the the lowest account balance is paid a higher dividend rate compared to those with the highest account balance.

This is actually the reverse of how some banks pay interest to depositors where those with a higher savings account balance is paid a higher dividend.

(... deleted...)

As per the EPF annual report, 0.4% of account holders own more money than the bottom 51.91%.

In fact, 28,727 EPF members having about RM47.2 billion worth of savings in EPF - or an average RM1.64 million per depositor.

As EPF's primary goal is to ensure all Malaysians have adequate savings in their old age, I see no reason why the richest Malaysians should enjoy a completely risk-free (all EPF deposits are guaranteed by the government) above market rate dividend from EPF every year.

Therefore, I believe that a greater share of the profits generated by EPF every year should go to those with the lowest balances so that more Malaysians can reach adequate retirement savings quicker instead of benefiting those who already have more than enough to live comfortably post-retirement.

When implemented, this move can also help reduce the wealth gap among Malaysians towards a fairer Malaysia.


I support! Because it was my exact thoughts years ago... maybe have even mentioned it somewhere in this forum.

The dividend payout could be something like this, instead of a flat 5.5%:

1st RM50,000: 10.0%
2nd RM50,000: 9.0%
3rd RM50,000: 8.0%
4th RM50,000: 7.5%

RM200K to RM500k: 5.5%
RM500k to RM750k: 5.0%
Above RM750k: 4.0%

RM47.2 billion is a lot of money. Of course they would be withdrawn if the money could not generate the expected returns from EPF. Don't forget that EPF member can withdraw the amount that is above 1 million in his account.

Up to them to withdraw or not. But anyhow, the money will have to go somewhere. Maybe into properties, maybe into the stock market, maybe into frivolous luxury items. It will be an added boost to the economy anyhow.

Nothing unfair... just like how banks are giving lesser interest or no interest if our savings account is not more than the minimal amount.

Based on my rough example of a likely reversed tiered dividend payout, the breakeven would be at RM1,066,500.

1. The dividend payout for each level at the above tiered rate:

1st RM50,000: 10.0%... RM5,000.
2nd RM50,000: 9.0%... RM4,500.
3rd RM50,000: 8.0%... RM4,000.
4th RM50,000: 7.5%... RM3,500

1st RM200,000... total dividend = RM17,000. (if at flat 5.5%, it would be RM11,000.)

next RM300,000: 5.5%... RM16,500
next RM250,000: 5.0%... RM12,500
next RM316,500: 4.0%... RM12,660

Total dividend = 17,000 + 16,500 + 12,500 + 12,660 = RM 58,660.00

If at flat 5.5%, RM1,066,550 x 5.5% = RM 58,657.50 (A difference of RM2.50.)


2. Please note this is my own example. It is just to illustrate how EPF members with low account balance would get a higher dividend payout.

It makes a great difference to the lower accounts. If the account balance is RM60,000, the annual dividend would be RM5,900 instead of RM3,300 (at flat 5.5%). A huge difference of +79%.

In the accounts with more than a million, say RM1,200,000; the annual dividend would be RM64,000, instead of RM66,000.
The difference is only -3%.

3. If not mistaken, the majority of the accounts in EPF at age 55 is about RM60k.

======

PS. The above example is not based on any known data. It is most likely way off base... the difference between the highest and lowest percentage would likely not be greater than 2% or 3%. The above example has it at 6% difference!

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edited: RM1,166,550 corrected to RM1,066,550.


This post has been edited by j.passing.by: Nov 29 2020, 06:57 AM

It is not based on any data... it is just an illustration of reverse tiered rates.

It can't be said to be a subsidy... if EPF is not able to get better investment opportunities to have higher returns in the last portion of their funds. The last several billions could be sitting there in their vaults in cash...

This post has been edited by j.passing.by: Nov 29 2020, 06:10 AM

We don't have the complete knowledge of EPF investments and their cashflow, but it seems to me that the previous chairman was very concern on finding better investment opportunities, as they were always overloaded with cash sitting in their vaults.

One way to trim down the surplus cash, is giving lesser dividend payout so that EPF members (at retire age) will make bigger withdrawals instead of putting in money to get better dividends than what they could get from fixed deposits at banks!

EPF is getting contributions every month... the cash inflow per month can match 4 months of withdrawals. And about 50% of their investment is in government securities and bonds. So how to know which long term investments that are now giving returns were purchased using the money deposited by the older depositers?

The reversed tiered rate don't have to take this into account... it only care how much the average man should have in his account.

If he has more than this x amount, it is considered surplus, and would get a lower return and dividend on the surplus amount.

The fairest dividend should not be a predetermined and fixed percentage... it should still be based on the total annual returns collected in the financial year. Hence the tiered rates is still based on the investment returns for the year.

=====

Note: If the EPF member has too much money in EPF, he can use I-Invest and invest into unit trust funds to get better returns.

EPF i-invest is not applicable to those contributors who don't meet the conditions to withdraw to invest into unit trusts.

Come to think about it, i-invest withdrawal is out of Account 1. The tiered rate could probably on Account 1. Account 2 would remain same at a flat rate. So, the difference and impact make by the new tier rate is lessen by 30%.

Needless to say, tiered rate is a boom to younger EPF members with a lower amount in their accounts, a higher rate means a higher rate of compounding... they will pass the 100k milestone faster and earlier.

And will continue getting higher compounding rate on the lower portion of their money. The portion of their money nearer to the X pivot point, will be nearer and nearer to the same flat rate on their Account 2.

Older EPF members, especially those in the retirement age, would be detered to keep too much money above the X pivot point (about RM1 million in the above example), since the surplus amount above the X pivot point will return a lower rate.

What if the tier rate is only applicable to Account 1?

Not sensible to give a higher rate to Account 2, as Account 2 is meant for withdrawal for special purposes before the member reaches age 50.

The main argument for the tier rate is this:

"As per the EPF annual report, 0.4% of account holders own more money than the bottom 51.91%.

In fact, 28,727 EPF members having about RM47.2 billion worth of savings in EPF - or an average RM1.64 million per depositor.

As EPF's primary goal is to ensure all Malaysians have adequate savings in their old age, I see no reason why the richest Malaysians should enjoy a completely risk-free (all EPF deposits are guaranteed by the government) above market rate dividend from EPF every year."


If the government borrowed from EPF or issued bonds to EPF at a preferred rate, it would have to be in a much larger amount. And the bulk of the returns gained by EPF goes to the upper 1% of the EPF members.

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edit: 0.4% of account holders (EPF members) is holding more money than the bottom 51.91%.

This post has been edited by j.passing.by: Nov 29 2020, 01:16 PM

Noted. Try not to take the last sentence from my previous post and take it out of context. It is not about choice or not.

The conversation is on giving a higher rate to lower portions of in the accounts... up to a certain ceiling; and lower rates above the ceiling.

The suggestion is in reversed direction to the normal bank rates on savings or FD, where the depositor put in a higher amount, and getting a higher rate. Or put into a longer term FD, and getting a higher rate.

How so? You can choose not the make any self-contribution. Unless, of course, you are among those who are working abroad and are returning home for early retirement. And bringing home tons of money.

Self-contribution has a liimit of 60k a year. The 60k will enjoy a higher rate... until the total amount in the account reaches the ceiling limit, and then the portion of money above the ceiling gets a lower rate.

If the tier rate is only applicable to Account 1, and the self-contribution goes into both account 1 and 2, the amount inside is a smaller amount and would reach the ceiling slower... and enjoys the higher rate longer.

If you have read and understand the example given in post #4882, the 1 million is getting the same dividend payout, whether it is tier rate or flat rate.

So, your premise of 1 million in EPF would not generate enough retirement money is blown out of the water.

If the EPF member has more than 1 million, then he should consider other means of investment that could give him better returns. Please read carefully, I don't mean he have to find another investment vehicle for his 1 million. Only the extra portion above the 1 million.



This post has been edited by j.passing.by: Nov 29 2020, 02:16 PM