Saturday, February 29, 2020

Workers victims of Economic Stimulus Plan - Spend more of money - by reducing savings for old age livelihood?

Workers again are the VICTIMS of government when their social security is sacrificed to 'help' the stimulate the Malaysian economy. Workers have to use their own money and spend more to revive the economy...but some companies are getting discounted electricity...and others. 

Best the government just give workers money, say RM100 - RM150 monthly to spend and help motivate the economy?

There continues to be a major concern amongst many about livelihood and welfare of Malaysian workers especially when they get old and cannot anymore find jobs or income sufficient to sustain their livelihood. 

The minimum contribution rate under the Employees Provident Fund (EPF) will be cut from 11 per cent to 7 per cent from April 1 until December 31
With the announcement of the interim Prime Minister, that employee EPF/KWSP contribution is reduced from 11% to 7%, that is a 4% reduction, besides the impact on long-time social security, even a Minimum wage worker of RM1,100 will lose roughly about RM32 per year - because if the money is not in your EPF account, you do not earn dividends. If your income is higher, then you lose much more..
RM1,100 - Now will have RM44 more to spend,and not save in EPF for your old age.
RM2,000 - RM80
RM3,000 - RM120
RM4,000 -  RM160

Well, since EPF gives out dividend of about 6%, because of this reduction, an earner of RM1,100 will also lose about RM31.68 per year. [No money no dividend]

What the government should have done if they wanted workers to have more money to spend to stimulate the economy, the government should have given workers direct financial aid, maybe RM100 or more every month, for all workers or maybe just workers earning lower income, maybe RM3,000 or more. This data could easily be obtained from EPF records for local workers, and other records some with government agencies or even employers themselves. Maybe this aid should also be extended to currently unemployed workers, and also self employed.

After all, did not the government give monies or 'monies worth' to companies and others, including the reduction of electricity Bills, removal of service tax, etc..  

An example would be 'Temporary six months discount of as much as 15% for electricity bills for hotels, tourism agencies, airlines, and shopping centres'(Star, 27/2/2020).

The government could have also cut workers electricity bills, water bills and phone bills up to RM100-150 per month. Then workers will have more money to spend - that is what the government want - make more money available for spending. 

Many Malaysian workers may plunge intp poverty after retirement .. There is not enough money in EPF savings to sustain almost 68% beyond 4 1/2 years, even shorter now as cost of living continues to rise...After that what? Do they all end up in absolute poverty and become homeless just like what is happening now in USA? Or are the poor workers expected to work until they die - NO RETIREMENT for the poor...is that what the government wants?

More than two-thirds (68%) of EPF members aged 54 had less than RM50,000 in EPF savings! With the household poverty line income at RM930 monthly, RM50,000 in savings will only last 4½ years. The bottom fifth of EPF members have average savings of only RM6,909!
According to EPF, 70% of members who withdraw their funds at age 55 use up their savings less than a decade after retiring. Most EPF savings are therefore not enough to stay out of poverty after retirement.
Remember, that because the government encouraged, workers bought houses BUT many will have to pay their month housing loan obligations beyond the age of 60 or retirement? How will the lower or even middle  income workers be able to do this - cannot pay, bank seize the house and sell it off...?
Why the compulsory savings for old age? Governments want workers to SAVE monies but the reality is that many do not have the discipline or ability to do the same. Many will spend today to 'enjoy' life, and do not think too much about the future. Many believe that they do not have to worry about 'old age' because their children will look after them - is that a belief that can be relied upon in the future.[Today many young people are buying houses, without even considering extra rooms that they may need if they have to house and take care of their old parents...
There are 2 options to take care of workers in their old age or after they retire - a PENSION SCHEME(that will ensure some monthly income until they die, and thereafter until their spouse dies, or their children achieve maturity), or an 'Employment Provident Fund' scheme, which is the EPF/KWSP scheme. 

Major problem with the EPF/KWSP scheme today is that the worker upon reaching a certain retirement age can withdraw ALL monies, and many finish this monies very fast and then there is no money for the remaining years they live. EPF also have revealed that majority of workers in Malaysia do not have enough monies to sustain their livelihood until death - most, even if they are disciplined and spend about RM800 per month, will only have enough money to last them for less than 5 years ...thereafter HOW?

The best solution is to develop a State run pension scheme that will provide not just workers but also others a steady income until death. But cost of living really increases and so even the EPF/KWSP savings would be able to sustain them for a shorter period... How much do you now need for a simple living? 

Why state run, not some Insurance scheme by corporate entities? Simple, any corporate entities be it banks or insurance companies or other companies can always become financially incapable to undertake their obligations in later years - they could become 'bankrupt' or wound up, they could transfer assets to another 'new' company and not their liabilities. [Remember also what happened in the Malaysian Airlines].

Hence, the best solution is a government-run pension scheme, for it is almost impossible for any government to become 'bankrupt' and so workers future will be secure.
Workers 'old age' security is being abandoned yet again by the government to 'stimulate' economy.. and this has happened just too many times in the past in Malaysia...but first time for new ALTERNATIVE Pakatan Harapan government, where many expected better..


This EPF measure is not new and has been introduced in the past, with the government lowering contribution rates in 2001, 2003, 2009 and 2016. In 2016, for example, the government lowered employees’ contribution rate to 8% from March of that year until December 2017.
Under the BN government, the allowing of workers to withdraw the monies in the EPF for certain purposes like buying house, etc was maybe the worst decision. This was not concerning future contributions - but existing savings, resulting in the reduction of old age savings maybe even by 50%. 

What this means is for workers to spend more money - but the government is not giving workers this money BUT is getting workers to use THEIR own monies which is meant for their 'old age security' NOW..more money to spend now. The government is NOT BOTHERED with workers.


2020 stimulus: Dr M says EPF rate cut to 7pc, RM150 more cash handouts under BSH



Interim Prime Minister Tun Mahathir Mohamad speaks during the economic stimulus package announcement at Perdana Putra building in Putrajaya February 27, 2020. — Picture by Shafwan Zaidon
Interim Prime Minister Tun Mahathir Mohamad speaks during the economic stimulus package announcement at Perdana Putra building in Putrajaya February 27, 2020. — Picture by Shafwan Zaidon

KUALA LUMPUR, Feb 27 — The minimum contribution rate under the Employees Provident Fund (EPF) will be cut from 11 per cent to 7 per cent from April 1 until December 31 this year with the aim of potentially unlocking up to RM10 billion worth of spending by Malaysians to help drive the economy that has been hit by the global Covid-19 virus outbreak.

But Interim Prime Minister Tun Dr Mahathir Mohamad also said Malaysian employees “have the option to opt out from the scheme and maintain their contribution rate” for their retirement savings at 11 per cent.

In his announcement of an economic stimulus package today, Dr Mahathi said Malaysians receiving cash aid under the Bantuan Sara Hidup (BSH) scheme will receive a RM200 payment in March, two months earlier from the earlier scheduled payout date of May.

They will also receive more cash aid, with an additional RM100 to “be paid into the bank accounts of all BSH recipients in May 2020”.

“Subsequently, an additional RM50 will be channelled in the form of e-tunai,” he said.

Besides boosting local spending to help cushion the economic fallout from Covid-19, Dr Mahathir said the government will also try to help Malaysians earn more money through online selling and lower their living costs.

He said Bank Negara Malaysia will provide RM1 billion of agrofood facility at 3.75 per cent interest cost to promote food production activities for both domestic and export demand, while the government would allocate RM10 million to the Federal Agricultural Marketing Authority to provide food storage facilities to help reduce food prices.

Dr Mahathir said 10,000 local entrepreneurs will also get grants of RM1,000 each to promote the sale of their products on e-commerce platforms, and with the Malaysian Digital Economy Corporation to get a RM20 million allocation to transform Pusat Internet Desa into e-commerce hubs.

Dr Mahathir noted these measures were necessary as the Covid-19 disease still had a significant impact on the global economy and Malaysia despite it being well-contained locally.

Malaysia has had 22 cases of infections and zero fatalities as at February 26. Twenty have fully recovered and been discharged, leaving only two left hospitalised but in stable conditions.

The correct EPF deduction

In an immediate response, the EPF said the government’s decision to reduce the minimum statutory contribution rate for employees to 7 per cent will affect EPF members aged below 60, noting however that the EPF rate by employees for those aged 60 and above will remain at zero per cent.

“The move to reduce the statutory contribution rate is part of the Government’s economic stimulus package intended to cushion the blow from the economic fallout following the global Covid-19 outbreak,” the retirement fund for employees in the private sector said in a statement today.

EPF said employers are required to ensure the correct amount is deducted from their staff’s salaries for the EPF contribution, further noting however that Malaysian workers could opt to continue their current rate of deductions for retirement savings.

The pension fund said employees may choose to maintain the current contribution rate of 11 per cent by completing the form “Notis Pilihan Mencarum Melebihi Kadar Berkanun KWSP 17A (Khas)” available on its website.

“This notice must be presented to employers to be submitted to the EPF,” it said.

EPF said those who require more information could visit any EPF branch, or its website, or call the EPF Contact Management Centre at 03-8922 6000. - Malay mail, 27/2/2020





Pros and cons to lowering EPF contribution rates

Focus


Sunday, 23 Feb 2020

By DINA MURAD and RASHVINJEET S. BEDI









Yeah: Employees must be given option to choose whether to lower their EPF contribution rate or not.
ANY extra cash he takes home is a boon for this 35-year-old engineer who wants to be known only as Ganesh.


The father of two young children in Kuala Lumpur – one of whom is in kindergarten – says an additional RM200 would be beneficial.

“It might not seem like a lot but it provides some breathing space and some room to spend on my family,” says Ganesh, who is the household’s sole breadwinner with a take home salary of about RM6,000 a month after deductions.

While he can get by on that amount, some months can be a squeeze. So Ganesh is receptive to the suggestion that his mandated contribution to the Employees’ Provident Fund (EPF) be temporarily reduced.

Currently, employees contribute 11% of their salary to the fund while employers must put in a minimum of 12% for salaries more than RM5,000 and 13% for salaries lower than that.

Earlier this month, the Malaysia Retailers Association and Malaysia Retail Chain Association (MRCA) urged the government to temporarily reduce workers’ EPF contributions by 3% to mitigate business losses due to the current Covid-19 outbreak.

Similarly, the Malaysian Employers Federation expressed hope that the government will reduce employers’ and employees’ EPF contributions by 2% for the time being due to the novel coronavirus disease epidemic.

The proposals have received a mixed response from EPF members.

A promoter in a KL mall who identifies herself only as Zarina says that while she would be happy to have extra money in her pocket, she would likely save it for a rainy day anyway.

“We don’t know how long this outbreak is going to last and what impact it will have on the economy,” says the 29-year-old. “I’m more worried about whether I’ll still have a job at the end of the year or even in six months.”

For cleaner Siti Zubaidah Othman, who works in a shopping mall in Petaling Jaya, lowering her EPF contribution rate will not make a big difference to her monthly spending.

“My pay is low anyway and I’m struggling to make ends meet,” says the 41-year-old. “Coronavirus will come and go but my problem continues the same....”

This EPF measure is not new and has been introduced in the past, with the government lowering contribution rates in 2001, 2003, 2009 and 2016. In 2016, for example, the government lowered employees’ contribution rate to 8% from March of that year until December 2017.

Economist Prof Dr Yeah Kim Leng believes that if the government were to consider the proposals, employees must be given the option to choose whether to lower their contribution rate or keep to the present percentage.

“I think allowing employees the option to reduce their EPF contribution will be one way to boost their disposable income. But it has to be optional to allow flexibility, as not all employees are affected, only those in some sectors,” says Yeah, a professor in economics who is Malaysian Economic Association deputy president.

However, lowering employee EPF contributions can also have negative effects, he adds.

“Although it is a temporary move, it nevertheless will have the long-term effect of reducing employee savings, which are already currently low for many employees,” says Yeah.

“The concern is for the long-term impact on employee welfare, especially when many employees currently do not have adequate savings for retirement.”

While the Covid-19 outbreak has discouraged overall international travel, the situation in Malaysia is showing some improvement as 17 patients have recovered and been discharged. The total of confirmed Covid-19 cases here remains 22, with only five patients still receiving treatment in hospitals.

The outbreak, however, has taken a toll on the tourism and retail sectors, with the MRCA claiming that many of its members have reported sales drops of 50%, with some expecting revenue to further drop by more than 80% over the next three months.

Prime Minister Tun Dr Mahathir Mohamad will unveil an economic stimulus package on Thursday to mitigate losses from the outbreak so that affected businesses can continue their operations and be ready to reap the benefits when the economy rebounds.

“If the outbreak is prolonged, it could potentially result in a more pronounced (economic) slowdown. The stimulus can be enhanced to support affected sectors to ensure employment can be sustained and businesses do not face bankruptcies,” Yeah explains.

Any attempt to reduce EPF contributions is akin to “adding salt to the injury of suffering workers”, says the Malaysian Trades Union Congress (MTUC).

“EPF acts as a deferred savings account. Contributing to it forces a savings habit and helps build a long-term source of money after retirement or in an emergency,” MTUC secretary-general J. Solomon tells Sunday Star.

“By reducing the contribution, the government and employers are actually converting these savings into disposable income, which could lead to reduced savings and, subsequently, social consequences, including old age poverty,” he says.

Soloman argues that reducing workers’ EPF contributions could hasten the fall into the poverty trap.

“While employer groups seek to reduce their contribution by between 2% and 3% during ‘difficult times’, they have never offered to increase their share of EPF contributions when companies do extremely well.

“Or will they compensate for the current proposed reduction by giving back that amount in better times and further increase that by 2% to 3%?”

The few times that the government implemented an EPF contribution cut, workers were given an option to maintain their contributions at the full rate, he adds.

Financial planner Rajen Devadason says that if the government launches an initiative to reduce statutory EPF contributions, every single wise employee should fill out the needed paperwork to keep their contribution at the present higher rate.

“Our EPF savings are the bedrock of our retirement funding programmes. We shouldn’t short-change ourselves by opting to pay less into EPF today because that will mean we have much less than we otherwise might have in EPF in the future,” points out Devadason.

Devadason says that given the rising levels of longevity risk Malay-sians are facing due to lengthening lifespans, as well as an increasingly expensive future, we need to establish and stick to a budget so that we can live well later in life.

The EPF declined to comment on the proposals but yesterday, it announced its dividends for 2019: 5.45% for conventional savings and 5% for syariah savings. This is the lowest dividend rate for conventional savings declared by the pension fund since 2008.

EPF chief executive officer Tunku Alizakri Alias attributed it to increased “volatility” in the world last year: “As anticipated, we saw substantially more volatility in 2019 compared with 2018. Certainly, 2019 exemplified what it means to be living in a volatile, uncertain, complex and ambiguous world,” said Tunku Alizakri in a statement.

He added that EPF expects 2020 to be just as or even more challenging than 2019, with the full impact of the Covid-19 outbreak likely to drag down already soft global growth. - Star, 23/2/2020

A better safety net for senior citizens



Ringgitplus Malaysia, a financial comparison website, conducted a financial literacy survey and found that 21 per cent of Malaysians didn’t save money at all. Photo: Reuters


AS we revel in the Lunar New Year celebrations with throaty shouts of “Gong Xi Fa Cai” or “Huat Ah” whenever we meet our friends and relatives or partake in the sumptuous yee sang salads, I can’t help but think about the not-so-fortunate who might not have the means to even celebrate.

In Pandan Indah, Kuala Lumpur, recently, I saw an old Chinese woman of more than 70 years struggling to cross the busy road. Armed with several lanterns intricately-made from ang pow packets, she had obviously employed her skills to earn a little extra.

Just the other day, I met Edwin, a 71-year-old Indian man selling curry puffs and nasi lemak in Wangsa Maju. I was gripped by what he said: “Even at this age, I try to make myself useful. I don’t want to be put in a situation where I have to beg for money. My wife makes them in our house and I come out to sell.”

We noticed many old Malay women squatting nearby drive-through restaurants, selling various kinds of snacks when they should be at home with their grandchildren. This makes you wonder why they’re still struggling to make ends meet.

Malaysian life expectancy is on the rise with males expected to live for 72.5 years and 77.4 years for females. By 2035, 15 per cent of our population would comprise people over 65 years, or about five million people. That’s just 15 years away and that’s a lot of old people.

Last year, Ringgitplus Malaysia, a financial comparison website, conducted a financial literacy survey and found that 21 per cent of Malaysians didn’t save money at all. Of this lot, 11.9 per cent didn’t save or admitted that they spent a lot on lifestyle, including shopping and entertainment.

Another 33.7 per cent revealed that their debt repayments rendered them unable to save, followed by 29.2 per cent who believed their essential expenses were too high, leaving them with too little amount to save, while the remaining 25.2 per cent saved only when there was enough at the end of the month.

Of those surveyed, 35 per cent kept less than RM500 a month, 23 per cent saved RM501 to RM1,000, 13 per cent (RM1,001 to RM2,000) while close to nine per cent said they could set aside more than RM2,000 a month. Interestingly, 89.2 per cent realised that their Employees’ Provident Fund (EPF) savings were not enough for retirement and 54.6 per cent of respondents aged 20 to 29 didn’t have a retirement plan at all.

Introduced in 1951, the EPF scheme made it compulsory for employees to contribute 11 per cent of their salaries to their EPF accounts. Employers contribute the equivalent of 13 per cent of the salaries of employees earning RM5,000 and below, and 12 per cent if salaries are more than RM5,000.

With Malaysians having enjoyed an average dividend of 6.02 per cent return for the last 10 years (2008-2017), the relatively high EPF dividend rate had given many contributors a false sense of long-lasting financial security. It’s time for a relook, seriously.

EPF statistics show that 70 per cent of its contributors who withdraw funds at 55 often use up their savings less than 10 years after retiring. But in recent years, there has been an increasing trend for contributors not withdrawing their EPF at one go.

Only 48 per cent of the labour force of 14.5 million out of a population of about 32 million have active EPF accounts, while 10 per cent work for the government and are eligible for pension. Others in the informal sector or self-employed are not covered by any retirement scheme.

EPF has suggested that the minimum savings that EPF contributors should have at age 55 is RM228,000. What’s startling is that only 18 per cent of contributors have that amount minimum savings target of RM228,000 in their account by 55. At RM228,000, this equates to a monthly withdrawal of RM950 to cover basic needs for 20 years.

In the past, many Malaysians used to depend on their children or grandchildren for incomes after they’ve retired. Some 30 years ago, the pressure on off-springs were not so intense as the burden could be spread around as they’ve usually about half a dozen siblings in a family. Now, people are living longer but have fewer children to support them.

Which brings to mind that there should be other schemes other than the EPF to provide a better safety net for senior citizens. It may be high time to look into private retirement schemes or even a lifelong income scheme for the elderly like in Singapore. In this way, retirees don’t have to outlive their savings, therefore having less reliance on family support once they build up their savings while being employed.

So, there needs to be a serious push to get more people to have better financial literacy to fend for themselves during old age. This is also where the Shared Prosperity Vision (SPV) can also evaluate into providing a wake-up call, especially for people in denial of their financial reality, or even effecting higher incomes for more Malaysians.

As Aesop, the ancient Greek storyteller used to say,”It is thrifty to prepare today for the wants of tomorrow.” Gong Xi Fa Cai!

# The writer is a former chief executive officer and editor-in-chief of BernamaAS we revel in the Lunar New Year celebrations with shouts of “Gong Xi Fa Cai” whenever we meet our friends and relatives or partake in the sumptuous yee sang, I can’t help but think about the not-so-fortunate.

In Pandan Indah, Kuala Lumpur, recently, I saw an old Chinese woman struggling to cross the busy road. Armed with lanterns made from ang pow packets, she had obviously employed her skills to earn a little extra.

Just the other day, I met Edwin, a 71-year-old Indian man selling home-cooked curry puffs and nasi lemak in Wangsa Maju. I was gripped by what he said: “Even at this age, I try to make myself useful. I don’t want to be in a situation where I have to beg for money.”

Then there are also old Malay women squatting near drive-through restaurants, selling snacks when they should be at home with their grandchildren. It makes you wonder why they’re still struggling to make ends meet.

Malaysian life expectancy is on the rise with males expected to live up to 72.5 years and 77.4 years for females. By 2035, about 15 per cent of the population would comprise people over 65 years, or about five million people. That’s a lot of old folks, and just 15 years away!

Last year, Ringgitplus Malaysia conducted a financial literacy survey and found that 21 per cent of Malaysians didn’t save money at all. Of this, 11.9 per cent didn’t save or admitted they spent a lot on lifestyle, including shopping and entertainment.

Another 33.7 per cent revealed their debt repayments rendered them unable to save, 29.2 per cent believed their essential expenses were too high, leaving them with too little to save, while 25.2 per cent saved only when there was enough at the end of the month. Of those surveyed, 35 per cent kept less than RM500 a month, 23 per cent saved RM501 to RM1,000, and 13 per cent RM1,001 to RM2,000. Interestingly, 89.2 per cent realised that their Employees’ Provident Fund (EPF) savings are not enough for retirement.

Introduced in 1951, the EPF scheme made it compulsory for employees to contribute 11 per cent of their salaries to their EPF accounts. Employers contribute 13 per cent of the salaries of employees earning RM5,000 and below, and 12 per cent if salaries are above RM5,000.

With Malaysians having enjoyed an average dividend of 6.02 per cent returns for the last 10 years (2008-2017), the relatively high EPF dividends had given many contributors a false sense of security. 

Time for a relook.

EPF statistics show that 70 per cent of contributors who withdraw funds at 55 often use up their savings less than 10 years after retiring. But in recent years, there has been an increasing trend for contributors not to withdraw all their savings.

EPF has suggested that the minimum savings EPF contributors should have at age 55 is RM228,000. But only 18 per cent of contributors have that amount at 55. The RM228,000 equates to a monthly withdrawal of RM950 to cover basic needs for 20 years.

In the past, many Malaysians depended on their children or grandchildren for income after they’ve retired. Some 30 years ago, the pressure on offspring was not so intense as the burden could be spread around as they usually have about half a dozen siblings in a family. Now, people are living longer but have fewer children to support them.

There should be other schemes to provide a better safety net for senior citizens. It may be high time to look into private retirement schemes or a lifelong income scheme for the elderly like in Singapore. There needs to be a serious push to get more people to have better financial literacy to fend for themselves during old age. This is what the Shared Prosperity Vision can evaluate in providing a wake-up call, especially for those in denial of their financial reality.

Aesop, the ancient Greek storyteller, used to say: “It is thrifty to prepare today for the wants of tomorrow.” Gong Xi Fa Cai!

The writer is a former chief executive officer and editor-in-chief of Bernama - NST, 22/1/2020


EPF ‘inadequate for retirement’


  • News
  • Tuesday, 23 Feb 2016

Miksa says retiring at the age of 55 requires a private savings rate of 18 to raise retirement income to a total replacement rate of 70.

HOW long one’s money lasts in retirement is a pivotal question to retirement planning.

In Malaysia, the answer is: not long enough, said Allianz Asset Management AG International Pensions head Brigitte Miksa.

“The retirement income provided by the nation’s pension scheme is one of the least adequate, according to our Retirement Income Adequacy (RIA) indicator, which ranks 49 countries worldwide according to their potential to provide an adequate retirement income for future retirees,” Miksa said.

“Benefits in Malaysia only amount to one-third of final salary (34%) when employees are first able to withdraw their pension pots at age 55, according to our calculations.

While this figure is slightly skewed in retirees’ favour – it assumes an annuity, when in fact, pensions are paid out as a lump sum – it still falls well short of the OECD’s (Organisation for Economic Cooperation and Development) benchmark of 60% to 70% net replacement rate,” she explained.

Consequently, retirees in Malaysia are likely to exhaust their assets during the five years following the first possible withdrawal.

At age 60, the nation’s official retirement age, Malaysians may well find themselves with no assets left, but with roughly 20 more years to live, according to International Pensions calculations.

While the added years are reason to celebrate, retirees should go into their twilight years prepared.

“For every year of increased life expectancy, people gain 10 months of healthy life, yet also two months that are likely spent in poor health.

“Consequently, health care costs loom large in retirees’ expenditure patterns and should be covered,” Miksa said.

Yet Malaysia can take some consolation in scoring higher than India and Indonesia in the RIA.

This is largely because of the wider coverage of the Malaysian pension scheme, the Employees Provident Fund (EPF).

The downside is that workers can withdraw their pension pot early, which only adds to the risk of outliving one’s assets.

“The EPF was based on a single-pillar approach when it started in 1951. It was the first public provident fund in Asia and served as a mandatory DC scheme for private sector employees.

“In 1980, a new pension act replaced the ordinances for public sector pensions and created the civil servants’ DB scheme.

“After the Malaysian New Economic Model reforms, the country’s retirement system abandoned its single-pillar approach. The private retirement and the deferred annuity schemes were launched in 2012 as a voluntary third pillar, yet their coverage is still limited,” Miksa pointed out.

So how can Malaysian retirees avoid running out of money?

One way is for younger workers to save more, ideally accumulating savings of 12 to 14 times their last annual salary to ensure an adequate retirement,” she said.

“In today’s pension framework, this translates into an annual private savings rate of 13% to 18% of workers’ income.

“Monetary incentives and financial education could encourage future generations to save into private pension schemes and thereby help protect the financially vulnerable, such as informal workers and low-to-middle income groups,” she said.

Miksa said while women were often found among the financially insecure, Malaysian women in the 30 to 34-year-old bracket earned 14% more on average than their male contemporaries. And female labour force participation is rising, reaching 55% in 2015.

“Consequently, Malaysian women have reason to hope that the younger wife’s curse, the fact that longer-lived women often suffer from lower retirement savings, will soon be lifted,” she said.

Another solution to boost retirement assets is for employees to work longer.

“This reduces longevity risk and allows them to boost savings during their later, high-earning working years.

“Postponing retirement for five years means workers can afford to lower their annual savings rate to 9% and still achieve a replacement rate of 70% of final salary. Delaying retirement to age 65 allows for a savings rate of 3%.

“Meanwhile, retiring at the age of 55 requires a private savings rate of 18% to raise retirement income to a total replacement rate of 70%, according to our calculations,” she stressed,

Not all is gloom in Malaysia. But it is time to start planning for retirement now, Miksa asserted. - Star, 21/2/2016

Most Malaysians cannot afford to retire


  • Business
  • Wednesday, 25 Oct 2017

Retirement Advisory Service at EPF Petaling Jaya branch.

MALAYSIA is ageing, and the population over 65 should come to 15% of the population by 2035. Current Employees Provident Fund (EPF) savings for most Malaysians are barely enough for a decent life after retirement.

Meanwhile, Malaysian life expectancy has been rising. Life expectancy at birth in 2015 was 72.5 years for males and 77.4 years for females.

Assuming someone lives until 75, with no major medical expenses and outstanding debt, average savings of RM194,000 would bring RM25 per day, or only RM810 monthly. Of course, this crude analysis does not consider many factors, but the picture is clearly dire.

Poor EPF returns

This year, EPF raised the minimum savings target by age 55 from RM197,000 to RM228,000. But only 18% of members have this much, far short of its target of getting at least half its members to meet the minimum level by 2021. Low investment returns and withdrawals permitted – for housing, health and education – imply even less for retirement.

More than two-thirds (68%) of EPF members aged 54 had less than RM50,000 in EPF savings! With the household poverty line income at RM930 monthly, RM50,000 in savings will only last 4½ years. The bottom fifth of EPF members have average savings of only RM6,909!

According to EPF, 70% of members who withdraw their funds at age 55 use up their savings less than a decade after retiring. Most EPF savings are therefore not enough to stay out of poverty after retirement.

There are 32 million people in Malaysia, with 69% of the population of ‘working age’ between 15 and 65. Only 48% of the labour force of 14.5 million have active EPF accounts.

Around a tenth works for the Federal Government and are eligible for pensions, contributing to other pension funds, such as the KWAP (Kumpulan Wang Persaraan [Diperbadankan]) and the LTAT (Lembaga Tabung Angkatan Tentera).

Others remain uncovered. Many employees, in the informal sector and others casually employed, do not have active EPF accounts, while many in farming and the informal sector are self-employed.

EPF assets diversified


A late colonial innovation from the early 1950s, EPF is now the world’s seventh largest sovereign pension fund in terms of total assets. In its early decades, EPF had to buy relatively low yielding government bonds, providing the government with a steady source of cheap funds. By 2015, its investment assets were RM685bil, after growing about 10% annually over the previous 15 years. EPF held considerable assets in ‘cash’ in the past.

Investments in traditional, lower risk, domestic, fixed income assets, especially Malaysian government bonds, remain significant. Of ‘held-to-maturity’ (HTM) investment assets, EPF has been accumulating Government sukuk (‘zero coupon bonds’) holdings. By 2015, these came to 29% of total HTM assets, rising rapidly from 2.7% in 2006.

Since the 1980s, EPF has become increasingly market oriented, and has been investing abroad since 1996. Over the years, riskier assets have come to account for increasingly large shares of total investment.

Ostensibly in search of higher returns, EPF’s foreign investments have grown. Investments in equities and properties abroad have been rising in recent years. EPF has gone into foreign markets since 1996, with investments in equity, fixed income yielding assets and real estate, especially in the US, UK, Singapore, China and Australia.

Significantly, it is now allowed to be a major investor, or even operator of businesses, i.e., well beyond being a passive portfolio investor -- a significant departure from past practice. This has undoubtedly affected the context, management incentives and governance of the fund, opening the door to abuse of various kinds.

Holdings in other asset classes, especially equity investments, have grown in recent decades. Direct real estate and infrastructure investments, such as toll highways and waste management, have grown since 2011, most significantly, its 49% stake in PLUS costing RM9bil in 2011.

EPF declared a dividend of 5.7% for 2016, to its 14.72 million members, with a total pay-out of RM37.2bil. Total gross investment income was RM44.2bil in 2015, with domestic (52%) and foreign (48%) sources contributing almost equally. While income from interest, profits and dividends remains stable, capital gains accounted for more than a quarter of EPF income in 2015.

Why EPF returns are low


As EPF savings do not provide most retired employees with enough to live above the poverty line after retirement, it is failing to serve its intended purpose. For over four-fifths of members, poor returns to their EPF savings will prevent them from retiring in comfort. Clearly, depressed wages, low EPF investment returns and high household debt are not serving most Malaysians well.

EPF and other retirement fund professionals need to be allowed to do their jobs to best serve their primary stakeholders, namely retirees, current and future. But political interference is preventing EPF professionals from serving members’ interests better.

Such political intervention in investment decisions does not inspire either EPF members or public confidence. In the past, EPF members were resigned to low returns as their funds were mainly used to buy government bonds offering low returns. With EPF investments more diversified in recent decades, EPF returns increased, but not by much.

Hence, EPF members do not appreciate their retirement funds being used to buy low yielding US infrastructure funds.

The Malaysian public does not want government leaders to sacrifice their interests to curry favour with a foreign leader, especially one who has never offered any concessions to advance our national interests.

* Jomo KS is a Malaysian economist expressing his own views. - Star, 25/10/2017

Friday, February 28, 2020

No need special Parliamentary sitting, just use of Parliament as venue for King to meet all MPs? Or any other hall?

Parliamentary Sitting? All we need is a VENUE for King to meet all MPs - that is all that the King requires to carry out his constitutional duty to determine whether anyone can get the 'confidence of the majority' to be elected PM..if cannot still, then NEW GE.



All that the King(YDP Agung) wants to do is to satisfy himself as to who enjoys the majority support amongst all Members of Parliament.

First, he met with all MPs one by one - but allegedly no single person arose who had the requisite majority confidence..

YES, events and changing positions that happened during and even after this process also means a MPs stance given to the King may have changed.. 

So, now the King, I believe want to get all MPs together again for the purpose of determining whether anyone can get the support or confidence of the majority for the King to appoint our NEW Prime Minister.

He may have thought (or was advised wrongly?) that the best was to call Parliament for a special emergency session this coming Monday - but then now legal impediments arise...

SOLUTION - Call for all the MPs to assemble personally at any hall or auditorium, and then carry out the needed voting.

If the first vote is not successful in achieving the outcome needed, then there could be a period of 'campaign' or even time for MPs to talk to one onother privately or to all MPs, and then there could be the next voting...

And so on and so on - until one person emerges with the confidence of the majority - and, if not, maybe the King will then dissolve the Parliament and we will have a NEW General Elections.

A Hall - well, most probably the King believed that the Dewan Rakyat(or Parliament) was such a hall ...with the required number of seats, audio visual systems, meeting rooms for private meetings, etc ..

Can the Parliament building be used for this purpose? No problem..

But, given the legal arguements emerging - it maybe should not be any special session of the Parliament or Dewan Rakyat - it will merely be a special meeting between the King and all Members of Parliament ...FULL STOP.

So no special sitting of the Parliament - just the King using the premises for a meeting with all Members of Parliament to ascertain for himself whether any candidate has the majority support so he can appoint him or her to be Prime Minister..

NOTE the MPs could pick ANY MP - even someone other than the names mentioned in the media Anwar Ibrahim, Mahathir, Muhyiddin Yassin...Maybe, they may pick Syed Saddique or Charles Santiago or any other ...after all we will be having General Elections in about 2 - 3 years. Maybe candidates with historical baggage is a problem.



 

 

Lynas’ licence renewed for another 3 years? A betrayal? Announcement not from PM or Minister?

LYNAS permit to operate in Malaysia for another 3 years approved? It is interesting that it happens during this current political turmoil.

The Malaysian government, however has not yet made any announcement about this - What more there is no Minister at the moment..

The Lynas issue was an important issue during the last General Election - Many believed that once UMNO-BN was out, the new government will close down LYNAS or at least get Lynas to take away their waste from Malaysia. 

BUT the people were disappointed as the new then PH government seem to have compromised their position...

More details must be provided by the government as to WHY the permit was extended? We may have to wait until we have a NEW Prime Minister and a new Cabinet to find out.

Or was it BN-ruled Pahang's decision as Lynas is operating in Pahang? Or is Pakatan Harapan free from fault?

Still wondering whether the people living nearby were even asked whether they are OK with Lynas operating on for another 3 years? Will the people around that Permanent Depository Facility(PDF) have a say at all?

Why do the people not have the final say? Democracy as practiced in Malaysia? What about the Sultan of Pahang - did he agree or he also did not have a say? A lot of questions...

See related post:-


Government renews Lynas plant license

The government has extended the licence of the controversial Lynas rare earths plant in Kuantan, Pahang for three years, its operator said on Thursday, despite concerns about the impact of radioactive waste it produces. - NSTP/ MUHD ASYRAF SAWAL

KUALA LUMPUR: The government has extended the licence of the controversial Lynas rare earths plant in Kuantan, Pahang for three years, its operator said on Thursday, despite concerns about the impact of radioactive waste it produces.

Lynas hopes its factory, which has processed rare earths from Australia since 2012, can reduce Chinese dominance in the market for the materials.

Rare earth minerals are used in everything from missiles to mobile phones, and Lynas is the only major producer of them outside China.

Environmentalists and some politicians are opposed to the plant owing to health fears related to the waste, and a review into the operation was launched in 2018.

But the company confirmed that the government has granted a new licence to operate until March 2023. The previous licence expired in September, and Lynas was initially given a six-month extension.

“Over the past eight years, we have demonstrated that our operations are safe,” said Lynas CEO Amanda Lacaze in a statement announcing the extension.

Lynas has to satisfy several conditions, including transferring some work that generates low-level radioactive waste to another country.

It must also identify a site to build a disposal facility for waste. – AFP - New Straits Times, 27/2/2020

Lynas’ licence renewed for another 3 years



PETALING JAYA: Lynas Malaysia’s licence has been renewed for another three years till March 2023, the rare earths company has announced.

It said the renewal is subject to several conditions, including developing its permanent disposal facility (PDF) within the first year from the date of the approval.

Lynas must also submit a work development plan for the construction of the PDF and report on its development status, as determined by the Malaysian Atomic Energy Licensing Board (AELB).


The company has to ensure the cracking and leaching plant outside Malaysia is in operation before July 2023.

“After that period, Lynas will no longer be allowed to import raw materials containing naturally occurring radioactive materials (NORM) into Malaysia.”

Lynas’ financial deposit, it also said, will continue to be held “for compliance with the relevant licence conditions”.

Earlier this month, reports said the government had agreed to renew Lynas Malaysia’s licence for another three years.

In January, Lynas said it had received consent from Pahang, where the plant is located, to build a storage facility.

In thanking AELB for renewing its licence, Lynas Corporation CEO and managing director Amanda Lacaze said they are reaffirming their commitment to “our people”, 97% of whom are Malaysians, as well as contributing to the Shared Prosperity Vision 2030.



“Over the past eight years, we have demonstrated that our operations are safe and that we are an excellent foreign direct investor.

“We have created over 1,000 direct jobs, 90% of which are skilled or semi-skilled, and we spend over RM600 million in the local economy each year,” she said.

On Aug 15 last year, Putrajaya agreed to renew Lynas’ licence to operate in the country for another six months, subject to several conditions. - FMT, 27/2/2020


 

Thai students mass protest for Democracy - Malaysian students? Indifferent or just don't care about justice and rights?

In Thailand are protesting when Democracy is being threatened. Where are Malaysian students - why are they so quite? Where are the people? Why are we so quiet? Do we not care? Are we OK that UMNO-BN may come back into power after we kicked them out in May General Elections? Are we happy about the betrayal of some MPs and maybe also some party of the Pakatan Harapan? 
Thailand’s normally docile students have been holding rallies around the country to express their discontent with the established political order.
We had a time when our university students were in the forefront of the struggle for justice and human rights...

Malaysian people feel that they NOW do not have a say in the selection of the Prime Minister - maybe we should be having elections for PM ...or at the very least a REFERENDUM so people can indicate who they want as the Prime Minister of Malaysia given this current situation.

Is there any of our MP that has gone back to the Rakyat(the people) and talked to their own constituents - the people they represent? Do the people not matter? They forget that it is the people that chose them to represent the people...but some seem to have forgotten in their personal quests of power and position?

Malaysians seems 'indifferent' or maybe they are just simply 'fed-up'. They are angry with the Betrayal of BERSATU and the 11 PKR MPs that left and may allegedly be involved in the attempt to bring back UMNO-BN into government...

Anyway, in neighboring Thailand, a new political party, the Future Forward Party, has  been dissolved...and people are protesting...because their democratic right has been 'violated'...by the disqualification of the MPs and party they chose.

The Future Forward Party, founded on March 2018, by new people (not by former members or leaders of UMNO-BN or PAS or other parties) - and in the last General Elections in Thailand,  about a year or less after it was formed, they impressively managed to win 81 seats in Parliament of the 500 seats contested. They managed to get 6,265,950  or 17.63% of the popular votes. VERY IMPRESSIVE - for a brand new political party. Maybe we too do not need the Anwars or the Mahathirs to form a new PROGRESSIVE for the people political parties.

Maybe we should also be looking to the formation of NEW political parties free of any ex-UMNO-BN or any ex-party leaders...[PKR formed by Anwar and friends(many are ex-UMNO-BN), BERSATU [Formed by Dr M and Muhyiddin Yassin again former PM and DPM of UMNO-BN] and Amanah [Former leaders of PAS] - We really have a shortage of NEW political parties, and maybe this should CHANGE giving us better choices that what we have now...

Maybe some of these OLD parties formed decades ago may simply no longer be relevant for modern Malaysia - What do you say?


Sparked by Party Dissolution, Students Rally in Bangkok and Beyond

Anti-government protest at Thammasat University in Pathum Thani province on Feb. 26, 2020.
PATHUM THANI, Thailand (AP) — Thailand’s normally docile students have been holding rallies around the country to express their discontent with the established political order.

The rare mass activism was triggered by a court ruling dissolving a popular opposition political party whose democracy-promoting policies had attracted substantial support among younger Thais.

As many as 2,000 students gathered Wednesday in the biggest demonstration so far, north of Bangkok at the main undergraduate campus of Thammasat University. Rallies have been held or are scheduled at at least 30 educational institutions.

Student protests of such breadth have not been seen in decades, but it is not clear if they will gain traction. They raise pressure on a government already accused of incompetence and failure to cope with an economic downturn.

“These protests are significant because they greatly raise the decibel level of organized opposition to the military-dominated coalition government in power,” said Paul Chambers, a political scientist at Naresuan University in northern Thailand.
Anti-government protest at Srinakharinwirot University in Bangkok on Feb. 26, 2020.
Many at the Thammasat rally wore face masks, a form of protection against the new virus, as they carried placards lambasting the government. A musician who took the stage apologized to the crowd that fellow band members could not accompany him because they were playing at other protest venues.

Thammasat’s in-town campus kicked off the campaign on Saturday, and prestigious Chulalongkorn University followed on Monday.

“This is a real organic movement that stems from students’ frustration at injustice. And I think all these protests that we see are just the beginning, the beginning of a sign that people cannot take what’s going in society anymore,” said Panasuya Sithijirawattanakul, a spokeswoman for the Student Union of Thailand who helped organized Saturday’s initial rally.

Last week, the Constitutional Court ordered the opposition Future Forward Party dissolved. The recently formed party won the third-highest number of seats in last year’s general election with an anti-establishment stance that attracted younger voters. But those same positions antagonized Thailand’s traditional ruling class, which is dominated by royalists and the military.

The court ruled that the party broke the election law by accepting a large loan from its leader. However, it is widely believed that the party was targeted for its popularity and for being critical of the government and the military. Its charismatic leaders were barred from holding political office for 10 years.

Discontent has been brewing since the army ousted an elected government in 2014, but protests then were limited to a small circle of students who braved repeated arrests.
Tight controls under military rule were lifted after last year’s elections, but the prime minister remained the same as under the military regime, former army commander Prayuth Chan-ocha, who staged the 2014 military takeover.

“The protests are significant in that they show a growing dissatisfaction with the Prayuth regime among younger Thais,” said Jacob Ricks, a political scientist at Singapore Management University. 

“A fair number of these students probably voted for Future Forward.”

He noted that after the 2014 coup, gatherings of more than a few people were banned and the Future Forward Party did not exist.

“Now students have more freedom to protest, an organization to mobilize around — the Future Forward Party’s social media structures — and emotional investment,” he said in an e-mail interview.
Student organizer Panasuya said the protesters don’t have specific demands because they have not yet coordinated with other universities.

“But now that we see others are thinking the same thing, we will reach out to others and come up with demands,” she said.

“I think we really have been fed up for many years now,” she said. “And this anger goes beyond Future Forward’s dissolution. It’s like the junta had dumped oil on us and Future Forward’s dissolution is the match that sparked the fire that is now spreading.”

“I think this could be the beginning of a bigger movement,” she added. “I can’t guarantee that, but I think it could happen.”

Ricks said Prime Minister Prayuth still holds the stronger hand.

“He can probably afford to ignore the protests for the time being as long as they don’t move off campus and cause major disruptions,” he said.

Peck reported from Bangkok. Associated Press writer Preeyapa T. Khunsong in Bangkok contributed to this report. - Khaosood Engl;ish, 27/2/2020

Thai court dissolves Future Forward Party (update)


Future Forward Party leader Thanathorn Juangroongruangkit reacts as he watches Thailand's Constitutional Court ruling, at the party's headquarters in Bangkok, Thailand on Feb 21, 2020. - Reuters

BANGKOK (AFP): A stridently anti-military Thai party was dissolved Friday (Feb 21) and its key members banned from politics for a decade over a US$6 million loan by its billionaire founder, a withering blow to the kingdom's pro-democracy movement.

The ruling could edge a politically febrile kingdom -- whose economy is shrinking -- closer to the street protests, which have scored much of the last 15 years of Thai history.

The Future Forward Party (FFP), fronted by the charismatic auto-parts scion Thanathorn Juangroongruangkit, emerged from nowhere in March last year to become Thailand's third biggest party in the first elections since a 2014 coup.

The party's radical agenda -- calling for full democracy, an end to conscription and the removal of the army from politics and business -- won it 6.3 million votes and pitched it against the powerful, conservative military.

But since their strong poll showing, Thanathorn and his 76 lawmakers have faced relentless rounds of legal cases in Thailand's courts.

On Friday the nine-member constitutional court dissolved FFP, ruling a US$6 million loan by Thanathorn breached the law governing political parties.

The loan exceeded the US$315,000 limit on donations to parties by an individual, one judge said.

Panya Udchachon told the court that "party executives must have known that a loan of that amount would give influence (to Thanathorn) and he could gain advantage over the party."

Sixteen party executives, including founder Thanathorn, were also "banned for running for political office for 10 years," judge Nakarin Mektriarat added.
FFP has denied wrongdoing.

The same court has taken out several pro-democracy parties since 2008 and knocked two anti-establishment prime ministers from power.

The ruling appears to put a pin in the immediate political aspirations of Thanathorn, whose emergence on the Thai political stage has inspired millennials but frightened the country's conservative establishment.

"I don't understand why they do this. Do they want people to come out on to the street?" a desolate FFP supporter at the party headquarters told AFP, requesting anonymity.

Thailand has seen several rounds of bloody competing street protests roughly between those who support democracy and those who buttress the royalist army establishment, which draws on the support and wealth of the kingdom's oligarchs.

Thailand's economy is on the ropes -- freshly winded by the sharp tail-off in tourism as fears over the coronavirus slow travel -- while patience with the army-affiliated government of Prayut Chan-o-Cha is running out.

Prayut led the the 2014 coup against the elected government of Yingluck Shinawatra.

But the gaff-prone former army-chief is openly ridiculed since restrictions on free political expression were eased last year.

Thanathorn, whose wealth had appeared to gift him a shield of sorts, has been a fierce critic of military involvement in politics in a country whose history is peppered with coups.

Future Forward MPs remain lawmakers but have 60 days to find another party in parliament.

The party could also relaunch, but without its charismatic key executives is likely to struggle to keep the same number in their ranks.

Critics say Thailand's army-scripted constitution has created a lop-sided parliament stacked with former generals. - AFP - Star, 21/2/2020