Employees’ Provident Fund

Introduction of EPF

Employees’ Provident Fund (EPF), in Malaysia our people also mentions it as Kumpulan Wang Simpanan Pekerja (KWSP). EPF is a government statutory body under the region of the Ministry of Finance. EPF helps to administrate the saving plans and retire planning for personal sectors workers in Malaysia. Support of the EPF is required for Malaysian local people utilized as a part of the private division and deliberate for non-Malaysian occupants.

All the workers in Malaysia who have reached the age 16 and under a contract of service, they all have to pay the EPF. Under the contract of service means full time job. If the worker is at an age before 16, they don’t have o pay for the EPF. Each employee and each employer are resolved to pay month to month obligations in light of wages at Third Schedule and the month to month EPF duties must go to the EPF office at the amazingly latest the fifteenth of the next month.

A retirement plan that the private and open parts in Malaysia, embraced by the Employees Provident Fund (EPF) Act of 1991, planned to enable pros to spare a touch of their compensation if there ought to emerge an event of retirement, disappointment, illness or joblessness. Starting at 2007, experts are required to contribute no fewer than 11% of their pay check, with their directors contributing no not as much as an extra 12%. The spare resources would then have the ability to be utilized by the EPF for a wide assortment of speculations, and the partaking workers are reimbursed through reinvested benefits. Operators may pull back 30% of their amassed EPF spare stores at age 50, and 100% at age 55.

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Personal Financial Planning Process  

Nowadays, it is undeniable that financial planning is a significant element to ensure their shinning future, but they were lack of financial wealth management concepts. Oppositely, they just rely on Employee’s Provident Fund (EPF) which is one of the saving platforms that provided by the government to encourage all the workers to compulsory save a portion of their salaries for their retirement. But in fact, when people get into retirement, EPF will unsatisfy for those who want a better lifestyle. Personal financial planning is very helpful for individual as it is efficiently monitoring personal financial health. Therefore, the financial planning process enable people to achieve their financial goals after retirement and here are the six distinct steps in the financial planning process.

1st Step: Define Financial Goals

What is a goal? It means that an achievement that a person wants to obtain. Significantly, it is to build the purpose of planning and start financial planning to reach the personal financial goal in the future. It is obviously that different ages will have different stage of goals, for example, the financial goal of an old man who gets into retirement is able to receive money constantly in every month to cover their living expenses and enjoy a supreme and high standard of living lifestyle after retirement.

There are a lot of financial goals in one’s life, such as achieving financial freedom. Financial freedom plays an important role in ensuring an individual’s spending pattern. Once an individual achieves financial freedom, definitely he or she will have a higher quality of lifestyle as compared to others who does not. For instant, a retiree can choose either to purchase a flat house or a bungalow based on their progress of financial freedom. The retirees will financially restricted if have not achieve financial freedom. In order to reach their financial goals, they attempt to be more focus on what they are supposed to do without wasting their time or effort.

2nd step: Develop Financial Plans and strategies

Reaching your particular goals required different type of financial planning. Lets’ take a look at what major plan category includes.Asset acquisition planning is the first category of financial planning. It is important to safeguard one’s future living. For example houses, for those who would like to have comfortable lifestyle after retirement; they should have their own house before they get into retirement, because it is more secured compare to rental of a house, so after retirement they do not need to care about their living place.

Secondly, saving and investment planning are also one of the financial strategies. As an individual’s income increases, he or she should plan to put a portion of their income to save and invest. It is beneficial as it can generate returns in the form of interest and dividend. Therefore, they can enhance their financial strength.

3rd step: Implement the Plan and Strategies

There are six plans to help us to achieve our financial goals.

Firstly, we should have asset acquisition planning. We should determine which kind of assets to be acquired, either liquid asset such as stock and deposits or illiquid asset such as property.

Secondly, we are encouraged to have liability and insurance planning to avoid overspending and overcome uncertainty by purchasing insurance to protect our benefits if anything happens to us.

Thirdly, it comes to savings and investment planning. We should plan how much portion of money from our income should be set aside to save into bank or invest into portfolio in order to earn interest and dividend.

Then, we have employee benefits planning. Determining what are he benefits an employee is enjoying is very important because benefit-in-kind is also one of the form of money provided by the employer as compensation to the workers.

Also, we should plan the tax. It is helpful if we can plan how much tax that should be paid to the government because it enables us to know our gross income after tax and clear about our purchasing power.

Lastly, we have retirement and estate planning. Planning when to retire ourselves from the world of working and make estate planning to be inherited by the coming generations. Estate planning is necessary as it is also part of our beholding but could not enjoy by ourselves. Thus, we pass it down to our posterity.

4th  step: Develop and Implement Budgets

It should come to the development and implementation of the plan and strategies after a well-organized planning.  For example, if Eric, as an employee, intents to set aside a portion of his income to earn return of RM5,000, he should use it as a benchmark to determine whether he has successfully achieve his target.  If it does not meet the predetermined financial goal, he should constantly monitor his budget to be invested and make appropriate adjustments when necessary.