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More money back into the economy affected by COVID-19.

There’s no need to read further if you already know about this and wishes to download the form to submit to your HR so that the deduction for Employees Provident Fund (EPF), here’s that link from EPF. (click to download) However, if you like to know a little more about what’s happening beginning April 2020. This is part of the economic measures announced recently to contain the effects from COVID-19. (Click here to read yeah)

Article in thestar.com.my From April 2020 onwards, the employee’s statutory contribution to the EPF will be reduced from 11% to 7%. The employer’s contribution remains the same and there are no changes. EPF said that this measure will continue until December 2020 and that this is part of the recently announced Economic Stimulus Package (2020).

As per EPF’s statement: “The new statutory contribution rate for employees applies to those below 60 who are required to make the contribution. The statutory contribution rate for employees aged 60 and above, however, remains unchanged.” Employees may choose to maintain the current contribution by completing Borang KWSP 17A (Khas 2020) and this would be made available on epf.gov.my . To read this article in full it’s here: Article in thestar.com.my

The deduction difference is 4%. Someone earning a salary of RM3,500 for example would only have an extra RM140 into his salary instead of going into his / her EPF account. How would this be able to help the economy then? Well, if most of everyone were to spend this extra RM140, then 1 million people will be spending RM140 million and this goes back into the economy. With a multiplier effect of 4 for example, this RM140 million will have an effect of RM560 million per month to the economy.

What is a multiplier effect then? Assuming we spend this extra RM140 for groceries at the local hypermarket. This hypermarket would then need to order replacements from their suppliers, the manufacturers. The manufacturers would then have orders to continue production and could then pay their vendors. Within this environment too, the employees at the hypermarket, the manufacturing plant and even the vendors will continue to have a job too. They would then have money to spend as well. I would not want to imagine what will happen when no one spends or when no one has money to spend… If you want to maintain the 11% contribution, click here for the form.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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