Employees currently contribute 11% of their monthly salary to EPF but the latest measure in the revised Budget 2016 to be implemented in March will automatically reduce this to 8%. EPF serves as a retirement fund and those seeking to take the 3% will only disrupt their savings momentum. For example, a 30-year-old employee earning RM4,000 a month may get an extra RM120 a month for 22 months but would end up losing RM10,006 at 55 in compound interest set at a constant annual interest rate of 5.5%.
When a 3% deduction in contributions was implemented from January 2009 to December 2010, some 2.2 million or 40% employees opted to maintain their 11% monthly contribution. Employees opting to take the 3% cut in their Employees Provident Fund (EPF) contribution will end up losing thousands upon retirement.
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