The Malaysian Trades Union Congress today welcomed the decision to replace the controversial Employees Provident Fund annuity scheme that was run by a consortium of insurance companies, with an optional pension scheme under the fund's management.

MTUC secretary-general G Rajasekaran said the announcement by Prime Minister Dr Mahathir Mohamad at EPF's 50th anniversary dinner in Kuala Lumpur last night, came as a pleasant surprise as EPF had been reluctant to cancel the scheme which, MTUC claimed, benefitted only insurance companies and not workers.

He added that following this, EPF should "no longer drag its feet" on the matter.

"It's a positive move that EPF will now have to manage the scheme, as we have proposed. We are not against the scheme but do not want insurance companies, whose main concern is profits, to handle it," he told malaysiakini .

Yesterday, Mahathir said the government has drawn up a framework for the scheme and the EPF is expected to endorse it.

He said payment could be made all at once or in monthly instalments for a 20-year period.

The premier added that members could start contributing to the scheme into a special account which would earn dividends.

It is learnt that another account, called Account IV, would be created for this purpose. Presently, there are three accounts in EPF: Account I for old-age savings and investment, Account II for housing, education and computer purchase and Account III for medical expenses of critical illnesses.

"Part of this (Account IV) could also be taken out if members wanted to go into business," Mahathir said, adding that he hoped workers and unions would not oppose the plan as it would benefit them.

Lobby effective

Rajasekaran said workers, unions and political parties who had lobbied EPF to reconsider the management of the scheme had been effective.

He urged EPF to negotiate with the affected insurance companies to reduce the penalty if workers decided to withdraw their money from the scheme that was first launched in July last year but suspended this May when Mahathir intervened to prevent a nationwide picket by the MTUC which objected to the scheme.

"Presently insurance companies warned that they would charge seven percent of the money put in as capital to invest in the annuity scheme. However, one insurance company, Tafakul Malaysia, is only charging RM50 for administrative cost incurred," he said.

"We hope the other insurance companies would follow the example of Tafakul Malaysia. After all, what have they got to lose? They have already profited from interest derived from the contributors who opted for the scheme for the last six months," he added.

EPF chairperson Abdul Halim Ali, who was also present at the dinner, said that the proposal would be tabled at the next board meeting, but did not reveal the date.

However, Rajasekaran told malaysiakini that MTUC will meet with EPF on Oct 11 to iron out the details of the scheme and push for its immediate implementation.

Restore benefits

MTUC had made several other demands including restoring the death and incapacitation benefits from a flat rate of RM2,000 to its original quantum rate of RM1,000 to RM30,000.

The congress had also requested to be consulted regarding investment decisions made by the EPF board following losses incurred by the fund due to its investment in the Timedot Com IPO shares which were initially undersubscribed by 75 percent.

The EPF, as at Dec 1999, has a total of 9.45 million members. The total number of active and contributing members is 4.5 million.