Enforced Savings Needed

AS someone who is ill disciplined when it comes to saving money for a rainy day, I am thankful that the EPF remains a solid bastion of enforced savings for ordinary salaried workers like me.
The EPF likes to remind us that its main role is to manage the retirement savings of its members, including the type of withdrawals made as governed under the EPF Act 1991.

So I am actually happy when the mandatory contributions are increased and hugely disappointed when the dividends are reduced. In my opinion, what we have in the EPF must always remain at the maximum possible, based on our earning power.

Even though certain withdrawals are allowed, I feel we should only use those that are absolutely essential, such as when my wife and I withdrew from both our accounts to help buy our first house.

Withdrawing to buy a computer, for example, is a no-no. Although I do invest in unit trusts, my consultant finds it very hard to convince me to take out more money from Account 2 on a regular basis despite all the forms I had pre-signed.

If it is so difficult for me to even use part of my EPF savings for pre-retirement needs as allowed by the law, why then would I volunteer to reduce my monthly contributions as suggested in the economic stimulus plan?

Perhaps the policy makers, taking a macro viewpoint, are convinced that the total sum that can be technically added to the market if everyone were to volunteer to take a three percentage-point cut, will make a difference.

They may imagine all of us heading to the shopping malls to spend, spend and spend. Or at least head to the teh tarik stall each evening to do our bit for the local economy.

But it will take much more to convince me that I will be helping to boost the national economy with about RM200 extra in my pay packet each month if I were to volunteer to make the cut.
I wonder what difference it would make to the majority of contributors who will have even less of the extra cash to spend each month.

Considering the cost of living has gone up and our purchasing power has been significantly reduced in recent times, there is little this magical three percentage points can do for the individual per se.

And another thing, there is now a tax-free limit on EPF savings and insurance premiums amounting to RM8,000.
If, by reducing our contributions, we go below the limit, it can also have implications on our tax bracket.

Unless we are those who truly know how to manage our funds to make our money grow, I will certainly not interfere with what I have in my EPF. I would rather the taxman take less from me each month. That would be a reason to go on a spending spree.

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● Soo Ewe Jin is deputy executive editor, The Star. He believes God never gives us more than we can handle, even in money matters.