THE Employees’ Provident Fund was set up not with the objective of creating a huge reserve of funds for the government to shore up the economy of the country, but to help the workers in their old age.

For the lower-income group of workers — the majority of contributors — the compulsory EPF deductions are their only savings for old age. This being the case, efforts to help them should enhance their savings, not deplete them.

The decision to allow a lower contribution (from 11 to eight per cent) is therefore inconsistent with the original objective of the fund. For a worker earning RM2,000 a month, this would give him an extra RM60 in hand, nothing much really.

However, when several million workers spend RM60 a month, the business people would be earning a handsome sum. To the workers, it would not be a shortfall of RM1,500 or so (over two years) but more, and even much more if they are just in their 20s.

Loss of dividends, compounded yearly, could mean a shortfall of perhaps RM10,000 at retirement age.

The proposition that the reduction by three percentage points is meant to help wage earners is not true. The real beneficiaries are going to be business people.

Neither is it true that the reduction of contributions to eight per cent is at the option of the workers. There is no provision in the EPF Act which gives employees the choice to reduce their contributions.

So, reducing the rate can only be made compulsory by amendment to Schedule 3, that is the table of contributions, by the minister.

Though Section 43(3) of the act provides for an employee or employer to elect to pay more than the prescribed rate, contributors who want to maintain their 11 per cent rate may fail to fill up Form 17A for several reasons, including the hassle of having to do so.

Thus, while claiming that the reduction is voluntary, the truth is that it is compulsory.

This smacks of what, in consumer affairs parlance, is called an “unfair trade practice”, as the onus is put on those who want to maintain the status quo to go through the hassle of applying for it.

Unless the employer agrees by counter-signing Form 17A, the employee would be stuck with the reduced rate against his will. This is unconscionable. The finance minister should therefore rescind the amendment/proposed amendment to Schedule 3, so that the rate of contribution is maintained at 11 per cent.

RAVINDER SINGH, Bayan Lepas, Penang

Source: NST – November 20, 2008