EPF Contribution Reduction To Encourage Hiring Of Workers Above 55 Years

KUALA LUMPUR, May 9 (Bernama) -- The proposed halving of Employees Provident Fund (EPF) contributions for workers aged 55 years and above and is to encourage employers hire more people in the above 55 age group.
Finance Ministry Parliamentary Secretary Datuk Seri Dr Hilmi Yahaya said, however, employers would be given the option of contributing a minimum of six per cent (of the workers monthly salary ) or make the maximum contribution (12 per cent) and be eligible for tax exemptions.
"Presently, after 55 years workers are not required to contribute to the EPF but once the EPF (Amendment) Bill 2007 is approved, we will make it compulsory for the contribution rate for this age group (employees above 55 years) to be 5.5 per cent (employee) and six per cent (employer) respectively," he said when winding up debate on the Bill in the Dewan Rakyat, Wednesday.
"This is a win-win situation for both parties," said Hilmi.
Earlier, M. Kulasegaran (DAP-Ipoh Barat) had asked for an explanation on the rationale for the reduction in the contribution rate for workers in this age group from the EPF's normal rate of 12 per cent (employer) and 11 per cent (employee).
Kulasegaran had said that it was a regressive step as such workers would need more savings for their retirement.
Explaining further, Hilmi said that usually at age 55, a worker would have reached his maximum salary range, which meant that the contribution on the employer's part would be rather high.
Because of this, he said, employers preferred to hire younger workers as the EPF contribution would not be so high.
"We do not want to unnecessarily burden employers but at the same time also want them to hire people who have exceeded the age of 55," he said.
On suggestions for the EPF to introduce group health inusrance schemes and have provisions for death benefits, Hilmi said that so far there were no such plans.
"It will be difficult for the EPF to buy such insurance schemes for contributors as the contribution rates vary. If EPF were to use money from its pool or profits for this, it will cause dividend payments to contributors to be diluted. The same would apply in the case of death benefits," he said. For now, the EPF allocated RM2,500 to the next-of-kin in cases of deaths of contributors, which can be claimed within a period of six months, he said.
On unclaimed contributions, Hilmi said that as of last December, RM119 million had not be taken out by 46,235 eligible contributors.
When met by reporters later, he said that of the 11 million EPF contributors, around 200 had savings of more than RM1 million each.
Once the amendment is approved by Parliament, contributors will be allowed to make withdrawals for investments without having to repay the EPF the amount taken even if they are below 55 years.
"Under the existing law, those making withdrawals for investment but have not reached the age of 55 must pay the amount taken back to the EPF. With the amendment, this will no longer apply," said Hilmi.
In his windup, Hilmi had also said that EPF's biggest investments were in the bonds and loans sector, with bonds in excess of RM5 billion, followed by securities at RM4.9 billion and equities (RM2.3 billion).
"Overall, 80 per cent of the investments are in secure government instruments but with the returns much lower," he said.
In terms of loans, Hilmi said that as of December, EPF's biggest lending was for government housing schemes totalling RM21.5 billion, following by to the National Higher Education Fund (RM12.5 bilion) and Khazanah Nasional Berhad (RM8.66 billion).
The Bill was later passed by the Dewan Rakyat.

tunku : there is a negative side og this new ruling, the employer will stop hiring the younger one to save the employer's contribution for the EPF.It's quite difficult for normal workers to save money,EPF is the only way to save money for future as we have no choice but to contribute, so it would be to increase the contribution percentage.As for employee age above 55 I believe most of them are in contract terms.So the basic salary can be lower in order to make less EPF contribution.