The recent decision by the government to allow EPF contributors to reduce their mandatory monthly EPF contribution to eight percent has received mixed reactions from analysts and contributors.

It is said that the government’s intention is to encourage spending, which will contribute to the country’s economy in these hard times. The government knows that if Malaysians have extra cash in hand, we are likely to spend rather than save.

While the move may help those in the middle and low income groups, it must be acknowledged that these are the groups who will end up with less savings upon retirement, as suggested by many financial planners.

Lowered mandatory EPF deduction for two full years can be quite substantial and affect future savings and dividends, if any.

What I would like to propose is that EPF should maintain the mandatory 11 percent reduction but allow contributor to withdraw yearly dividends, which are usually announced early in the year.

With many private sector companies unlikely to give bonusses or increments this year and the next, the withdrawal of dividends would definitely come in handy at the start of the year when many families spend more than usual for all kinds of expenses like school fees, uniforms for children, yearly property assessments, quit rent, insurance, etc.

Let's say a contributor has a balance of RM10,000 in his EPF account and a dividend of five percent is announced. He will then be allowed to a one-off withdrawal of RM500.00.

This measure, if implemented on a voluntary basis, would definitely help those in need without affecting EPF contributors’ mandatory monthly deductions and existing savings.