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EPF in big trouble

1st Case
Is the EPF being looted?

Will you get back your EPF money?
  • One of the largest funds in the world (C RM 440.52 billion
  • Represents the life savings of 12 million Malaysians
  • BN govt already spent 60% of the people's savings

23 June 2011, EPF said that 60% of its funds have been borrowed by the Malaysian govt.

Dec 2010, the govt still owes EPF about RM 240 billion.

This means the BN govt has already spent 60% of all your savings
DO YOU THINK you will get your money back?
See the chart (attached).  2012 will mark the 15th year of budget deficit with no sign of financial smarts.

The Constitution of Malaysia caps govt debt at 55% of GDP.  As of 30 June 2011, govt debt stands at 53%.  When it touches 55%, the BN govt will officially be in crisis and the Constitution may need to be changed to increase borrowing and possibly require a bailout.

What happened to Greece recently? They had to write off 50% of outstanding govt loans.  Just imagine if EPF is asked to take a 50% cut of outstanding debt owed by BN.  More than half your EPF money will be lost, and you just have to accept it, after 40 years of working.

Greek Tragedy from Malaysian Travesty? See the attachment for more info.

2nd Case 

No, minister, please
Posted on 7 February 2012 - 08:19pm (The Sun Daily)

by Tony Pereira

I WAS half-asleep as the front-page headline of theSun stared back at me.

In disbelief I read that funds from the Employees Provident Fund (EPF) — RM1.5 billion to be exact — are to be channelled to a foundation to provide loans to Malaysians who are not able to get a housing loan from a commercial bank. Not only that. The loan would be at a lower interest rate than that offered by a bank. The report quoted Federal Territories and Well-Being Minister Datuk Raja Nong Chik Raja Zainal Abidin as saying that these loans would be provided to retirees and those without steady income.

Only a week earlier, I had dropped by an EPF office to get a statement. The friendly customer service representative who attended to me suggested that I may want to withdraw some of my EPF savings and invest it myself. At first I was confused. Why would she suggest I withdraw some of my savings? Now, it all clicked.

Some 48 hours after I read the report of the scheme the government plans to introduce as soon as March 1, I am still in shock.

How can the government take funds which you and I have put aside for our retirement and use it to fund home purchases of those without a steady income? I am all for helping those who are experiencing difficult times, but there has to be another way of doing so.

In case it has escaped the notice of Raja Nong Chik and other members of the cabinet, the objective of the EPF is to set aside funds for employees who do not have any pension scheme. On retirement, the amount the employee and employer have contributed during the employees' working life is available with interest or dividends to be paid in a lump sum so that the employee has sufficient funds to fund his or her retirement.

The monies belong to the members of the EPF — not the government. The board of the EPF has a stewardship responsibility — to act in the best interests of its members.

I do not think this scheme is in the best interests of its members.

Sadly, there is very little protection afforded to us — its members — under our laws.

According to the EPF Act, its board of directors has no choice in this matter. Section 11 of the Act gives the minister power to give directions to the board. In other words, even though the funds do not belong to the government, the Act allows the government to decide how the funds which belong to the members of the EPF are invested.

Section 26 of the Act sets out the investment mandate of the fund. It specifically states the type of investments the EPF can make. There is one very broad statement which says that with the approval of the minister, the fund can invest in "any other form of investment".

This means that from a legal perspective, it is within the government's powers to implement the scheme which Raja Nong Chik has so gleefully announced.

Well, as a member of the EPF, I have a few questions which I would like answered.

If the fund is for those who are retired or do not have a steady income as reported, how is the borrower going to repay the loan?

Secondly, since these loans are to be offered at a lower interest rate than that offered by commercial banks, who is going to make up the difference in these rates so that the members of the EPF do not lose out?

Thirdly, who is going to fund the agency that is going to implement this scheme?

Does the EPF have to pay a fee to this agency to take on this task? After all, the amount of administration required to disburse RM1.5 billion will be significant. Does the EPF have to pay a fee for this scheme to be implemented?

Finally, how is it that such a scheme can be implemented so quickly? The scheme was announced at the end of January. Yet the minister claims that the first loans will be disbursed by March 1. Can all the checks and balances to ensure that the lender is protected be put in place within one month?

I understand that those of us who can afford it have a moral obligation to assist those less fortunate. But let's come up with a scheme which does not involve taking from a fund that has invested carefully for its members because it is expedient to do so.

My research has indicated that there are no legal avenues available to us — members of the EPF — to object to this poorly-thought-out and ill-conceived scheme.

If the government is really concerned about the welfare of those in the low-income or no-income category, it should allocate a budget and be transparent about the cost of doing this. Then there would be full transparency to the public. At it is, by using the EPF, accountability is absent and the cost of this initiative is lost in the myriad of investments that the EPF makes for its members. Clearly there is no budget in the government's annual operating plan for this initiative. Hence the use of the EPF.

So what do we do?

I could go back to that friendly customer service representative who attended to me at one of the EPF offices and follow her advice. At least someone at the EPF does have its members' interests at heart.

Tony Pereira is a chartered accountant and CFO of a private venture fund

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  1. KWSP hanya boleh dikeluarkan apabila sudah mencapai usia 60-tahun. pasti ramai yang tidak bersetuju dengan rancangan ini.

    1. I, myself is not agree with the motion.

    2. Ia patut dikembalikan kepada yang asal, 55 tahun dan bukan 60 tahun.

    3. Pengeluaran berperingkat masih boleh diterima sehingga umur 55. Umur 60 agak panjang.

  2. Wang untuk masa depan rakyat tidak patut dipertaruhkan. pastikan rakyat mendapat hak mereka ke atas simpanan tersebut.

    1. Diharapkan rakyat dibenarkan mengeluarkan simpanan KWSP mereka pada umur 55 tahun seperti dulu walaupun usia bersara sudah ditingkatkan kepada 66 tahun.

  3. wang KWSP adalah wang pekerja, ia harus dijaga dgn baik.

    1. The contributors' money shouldn't be jeopardized.

    2. Harap duit rakyat akan dilindungi kerana ia diperlukan bila mereka bersara nanti.

    3. EPR harus bertanggung jawab terhadap duit caruman rakyat.

  4. Selasai lah simpanan EPF kami itu kalau begini ... Cilaka punya kerajaan melayu pmalas tahu curi duit rakyat saja !!

  5. We can do without spin and bullshit when it comes to the EPF.

    It's not the done thing to play politics with the EPF.

    It's important to maintain public confidence in the EPF and financial institutions.

    Anyone seeking to undermine public confidence in the EPF should be charged with economic sabotage and terrorism. They should be locked up and the keys thrown away for good.

    RM 1.5 billion is peanuts. It hardly affects the dividends due to EPF members.

    The 60 per cent invested in gov't securities is news. The EPF is only supposed to invest a maximum 30 per cent unless they have since changed the rules.

    Government securities will continue to be an important source of investment for the EPF. However, 60 per cent is way too high. The Gov't can't be borrowing most of the money that EPF has. What's the purpose of such loans anyway? To steal from the public treasury via so-called development projects?

    To say that the Government has already spent 60 per cent of EPF funds is to say that Maybank borrowers, for example, have already spent 80 per cent of its depositors funds.

    If the depositors panic and converge all of a sudden on Maybank, do you think that it will be able to pay back all of them? No! The bank will surely collapse if there's run on it unless Bank Negara steps in.

    The question of a run on EPF does not arise because one can only withdraw at certain ages and for specific purposes only.

    In addition, the great strength of EPF is that more and more contributors sign up as they enter the workforce.

    Hopefully, the EPF will not use this as an excuse to operate like a giant Ponzi scheme.

    The drawback with a Ponzi scheme is that new players may not come in or come in fast enough for the older players to recoup their "investments" at grossly inflated prices.

    The 55 per cent national debt burden is not high provided the loans are not abused or plundered, and the gov't is willing and able to re-pay.

    The people will eventually kick out Umno and BN.

    Hopefully, it will happen before Malaysia becomes insolvent like Greece. It has never been proven in the history of the world that government spending and a bloated bureaucracy was the way to manage an economy.

    The key to the management of the economy is minimum wage for all including illegals, 1Country 1Price, education, smaller government, and increasing competitiveness. This formula has always worked.

    Once Malaysia becomes insolvent as a result of the bloated bureaucracy, government spending and the national debt burden, Umno and BN leaders will flee Malaysia even before the GE.

    The PR will win by default.

    If Umno/BN are kicked out before the nation becomes insolvent, the great danger is that PR won't be able to crisis manage the inevitable instability that will follow.

    It will be the fault of Umno/BN and not PR if there's instability following an Opposition takeover.

    The longer a party stays in power, the greater will be the instability when the party eventually goes.

    There will be instability even if Umno/BN were to go today.

    What more if Umno/BN being ousted from power is unduly delayed

  6. The government must be careful when investing with the people's EPF savings.

    1. harap menganalisis projek apa yang lebih sesuai dan risiko seboleh di tahap yang minima.

  7. However in any investments, there are always risks presented. The higher the profits, the higher the risks.

    1. For this specific case:

      1) The risks are great
      Borrowers failing to pay debt. There's probably a good reason why the banks wouldn't give them a loan.

      2) The profits would be minimal
      The loan would be at a lower interest rate than that offered by a bank.

      Good news is we are allowed to withdraw our investment to buy a house (2nd Account) and to invest in another fund that's not wholly controlled by someone with only a cursory education in finance (1st account). I don't know about you but I'll be keeping the bare required minimum in my EPF account 1 from now on.

  8. kerajaan pasti takkan jejaskan wang simpanan pekerja.

  9. Ternyata kerajaan semakin miskin dan simpanan semakin berkurangan.

  10. Adakah mungkin EPF bankrup? Harap keadaan EPF masih positif.

  11. Don't Spend people saving please. This saving for the future thing.

  12. Nampaknya ISU EPF menjadi persoalan sekarang ini. Ini kerana kita sedia maklum yang mana duit EPF diambil oleh kerajaan untuk pelaburan.

  13. Mungkin penggunaan EPF ini perlu lah dijelaskan kepada penyimpan. Apa sebenarnya berlaku.

  14. lagi banyak dana kwsp digunakan jika Anwar jadi PM.. di mana dia mahu dapat dana untuk melaksankan pendidikan percuma, menurunkan harga bahan apai, menurunkan harga barang keperluan, menghapuskan tol, rm500 untuk guru, menaikkan royalti minyak, menghapuskan cukai, dan sebagainya.. dari IMF??

  15. kalau betullah Pakatan tidak rasuah, bagaimana boleh timbul kes penyelewengan tender rm600 juta di kedah?? itu baru kerajaan negeri, belum rampas kerajaan persekutuan..

    1. Lebih menghairankan apabila SPRM dan PDRM yang dikawal sepenuhnya oleh BN gagal mendakwa dan memenjarakan sesiapa pun berkaitan kes ini yang hebat disebarkan oleh media yang dikawal sepenuhnya oleh BN.

  16. With the Private Retirement Scheme (PRS) acknowledged as a supplement to the Employees Provident Fund (EPF), it is important for one to know and understand the difference between the two.

    Pension and retirement scheme experts and economists The Malay Mail spoke to said this is so an individual can make an informed decision on what is the best retirement plan for him or her.

  17. Launched by Prime Minister Datuk Seri Najib Razak on July 17, the PRS, to kickstart some time in September, offers the public the option to invest with one of eight Securities Commission--approved PRS providers, including syariah--compliant products, with returns available upon retirement.

    Najib had said the PRS was part of his commitment to reform and strengthen the entire pension and retirement landscape in Malaysia.

  18. Asian Strategy and Leadership Institute (Asli) Centre of Public Policy Studies chairman Tan Sri Ramon Navaratnam praised the scheme, saying it would provide extra money for private consumption through the tax exemptions of RM3,000 per year for employees and 19 per cent of employee remuneration for employers.

    It's a good package that can be improved over time if coupled with experience.

  19. Navaratnam noted that the PRS was not a pension scheme because the funds can be fully withdrawn when a member retires at 55. A pension scheme normally refers to regular payments made during a person's retirement. EPF Retirement Research head Farizan Kamaluddin said making additional funds available for a lump--sum withdrawal upon retirement was not effective in eliminating old--age poverty, which is a serious issue in Malaysia as the elderly population here is expected to grow from the current eight to nine per cent to 25 per cent in 2060.

    Without financial planning, a million ringgit can still be finished in a few years, adding that this could happen to anyone if they did not control their current consumption.

  20. Like PRS, EPF has no limit to the amount of contribution and provides tax exemptions of up to 19 per cent of employee remuneration for employers. But employees can get tax exemption of up to RM6,000, double that of PRS.

    Like EPF, PRS investments can be withdrawn following a member's death or their permanent departure from Malaysia. But PRS also allows pre--retirement withdrawals for any reason although subject to an eight per cent tax.

  21. EPF only allows withdrawals for certain reasons such as education, housing and computer purchases.

    Returns from PRS may also go down or up, they are not guaranteed as they depend on the performance of the funds.

    Organisation of Economic Cooperation Development Pension Policy Analysis head Edward Whitehouse said Malaysia needed a universal social pension plan where the government gives a flat rate to all citizens above a certain age.

  22. According to Whitehouse, maybe from 65 years, the government could give 15 or 20 per cent of the average wage here. It's feasible as it's only one or two per cent of the GDP (Gross Domestic Product).

    Actuarial Partners Consulting Sdn Bhd's Zainal Abidin Mohd Kassim said the Chilean method of gradually reducing pension payouts was s effective, as many pensioners found it hard to immediately adapt to a new spending pattern after retiring.


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