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MTUC puts off picket after PM's assurance of study by consultants

As extracted from SUNDAY Star newspaper - By M. Krishnamoorthy

New EPF scheme starts from next month

KUALA LUMPUR:  Contributors to the Employees Provident Fund will be able to make monthly withdrawals when it opens its new Account 4 next month.

The Withdrawal Payment Scheme, replacing the controversial annuity scheme, which has since been stopped, will allow contributors to draw out monthly payments over a 20-year period on reaching the age of 55.

As in other accounts, holders of the Account 4 will also enjoy annual dividends as apportioned by EPF based on the fund's annual balances as at Dec 31.

Members participating in the scheme will receive the dividends together with the month's payment at the time the dividend announcement is made.  The new scheme takes into consideration proposals by the Malaysian Trades Union Congress following nationwide protests of the former annuity scheme, which was handled by selected insurance companies.

EPF public relations manager Nik Affendi Jaafar said the new monthly scheme is opened to all contributors and involved the creation of Account 4, which allows them to transfer not more than 50% of their savings there from Account 1.

"Upon reaching the age of 55 and on condition that the amount in Account 4 has a minimum of RM24,000, members can withdraw monthly payments, the sum of which will be determined by the amount available in Account 4, together with the dividends earned for that year," he said.

"If the amount in Account 4 is less than RM24,000 when a member reaches the age of 55, the member can choose to 'top-up' the difference from other accounts (Accounts 1, 2 and 3)," he added.  Alternatively, if the member chooses not to 'top-up' the difference, all four accounts will be merged into one and the total may be withdrawn in a lump sum.

If the contributor passes away before reaching the age of 75, all monies left in the member's four accounts will be paid in a lump sum to the beneficiary or next-of-kin.

Nik Affendi said the Monthly Withdrawal Payment Scheme was for a 20-year term and members would not receive any payment after the age of 75.

The new scheme annuls the annuity scheme but those who had previously subscribed to the former scheme will continue to enjoy its benefits.  Those wishing to withdraw their participation in the annuity scheme are given the option of transferring their premiums into the EPF Account 1 or into Account 4 to qualify for the Monthly Withdrawal Payment Scheme if all other conditions are met.  < end of report >

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As extracted from The Star newspaper - By Wani Muthiah

EPF pension scheme in January

KUALA LUMPUR: The fate of the controversial annuity scheme introduced by the Employees Provident Fund (EPF) last July was sealed yesterday, when the fund's board formally announced its replacement with an optional monthly pension scheme scheduled to begin in January. 

EPF chairman Tan Sri Abdul Halim Ali said the move was in line with the government's announcement on Oct 5 to scrap the annuity scheme to make way for the new pension scheme.

The Government suspended the scheme in May and eventually decided to deactivate it after the Malaysian Trades Union Congress (MTUC) alleged that it was not feasible due to certain flaws and protested against it.

Abdul Halim, after chairing a special board meeting, said the new pension scheme, which would offer two options, would be handled by the EPF as opposed to the annuity scheme, which was managed by a consortium of insurance companies. He said an additional account, Account 4, would be created to accommodate the pension scheme.

Under the first option, EPF members below 55, would be able to transfer their current balance as well as new contributions not exceeding 50% of the total amount, from Account 1 to Account 4. Funds from the new account would be utilised to make monthly pension payments for 20 years effective from the date the contributor turns 55. Members, who choose to take-up this option, cannot cancel their subscription or retransfer their funds from Account 4 back to Account 1 once they sign up.

The second option would allow contributors to subscribe to the scheme upon or after reaching the age of 55 and members would receive monthly payments for the next 20 years, beginning one month after signing up.

"Contributors opting for both schemes will also receive dividends in addition to monthly payments," said Abdul Halim, adding that the scheme was a modification of the existing periodical payment scheme offered by the EPF. However, Account 4 must have RM24,000 or more to facilitate a monthly payment of at least RM100. The amount would be topped-up with funds from Account 1,2 or 3 to meet the difference if the need arises.

Abdul Halim said the 230,000 EPF members, who had purchased the annuity scheme before it's freeze, would continue to enjoy its benefits. "Those who already have the annuity scheme can also exercise the option of getting into the monthly pension scheme," he added.  < end of report >

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As extracted from The Star newspaper - By Audrey Edwards and M. Krishnamoorthy

Optional pension scheme to replace EPF annuity scheme

KUALA LUMPUR: The suspended Employees Provident Fund annuity scheme run by a consortium of insurance companies has been scrapped. It will be replaced by an optional pension scheme to be run by the EPF board, Prime Minister Datuk Seri Dr Mahathir Mohamad announced last night. 

"We have drawn up a framework for the scheme and the EPF board is expected to endorse it," he said adding that payment could be made all at once or in monthly instalments for a 20-year period.

He said members could start contributing to the scheme into a special account which would earn dividends, adding that part of this could also be taken out if members wanted to go into business. "The remainder will be paid in monthly instalments to the members," he added.

Asked when it would be implemented, he said the EPF Board would have to approve it first, adding that details were being worked out.

EPF chairman Tan Sri Abdul Halim Ali said this proposal would be tabled at the next board meeting later this month for a decision. A source said a new account, Account IV, would be created for this plan and members could opt to contribute a certain amount monthly from their Account I (60% of the contributions for old age).  < end of report >

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As extracted from The Star newspaper - Comment by V. K. Chin

Back to the drawing board for EPF scheme

The annuity scheme for Employees' Provident Fund contributors has reached an impasse. It has since been suspended to enable the pension fund to find a solution to the plan which trade unions and consumer organisations have objected to.

To recap, their objections are based on the fact that the scheme is being managed by the insurance industry as they feel that it should be managed by the EPF as this would benefit the contributors and not the insurers.

However, the EPF does not wish to handle this additional responsibility as it does not have the expertise nor the facilities to do this. In this sense, it is right to refuse to do so as annuity is an insurance product and should therefore logically be managed by the industry.

But some workers' organisations, particularly the Malaysian Trades Union Congress, are against this arrangement totally and to them it is either the EPF should do it or it should be scrapped altogether.

This adamant attitude has of course put the EPF in a dilemma. It was the government through the Finance Ministry which recommended that the annuity scheme be set up so that the contributors can have a steady monthly income on retirement.

At present, those who are eligible to withdraw their funds on reaching 55 are being paid in one lump sum. Unfortunately it has been found that many such retirees tend to spend their savings in just a few short years thus leaving them in financial difficulty as they grow older.

It is to help those who cannot manage a large sum of money that the government had thought up the annuity scheme as under this programme, the retirees would get a monthly payment for them to live on. In this way, they would be able to stretch their savings over a longer period and hopefully they would not need to depend on their relatives and the government to provide them with financial assistance in their twilight years.

This of course is a practical way of helping the retirees but unfortunately the annuity scheme has been strongly criticized because it was to be managed by the insurance industry. It has now been put on hold for two months so that the respective parties could try to resolve it at a further meeting.

But it is naive to think that the EPF would be able to save costs by managing the annuity scheme itself. There are several reasons why costs will go up if the EPF should agree to do it in the long-term interest of the workers.

The first is that the EPF will have to get consultants to assist it in implementing the scheme. And who do you think it will go to for such expertise? The insurance industry of course. And do you think that these experts will do it for free?

You can bet your life that they will charge the maximum for providing such advice. It is really silly to think that the EPF can just take over this job without incurring any extra expenditure. Of course the natural argument is that the pension fund should hire such experts to assist in implementing this programme. Such skilled personnel are not cheap to employ and even if the suitable ones could be employed, it will still require outside consultants to advise it.

It is bad policy to do this using only in-house facilities. It will take a sizeable workforce to handle this assignment and this number can be quite large thus burdening the EPF with some huge costs.    < end of comment >

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As extracted from The Star newspaper report on front page

PUT OFF AGAIN

Another two months before fate of EPF annuity scheme is known

PETALING JAYA: The much-awaited decision on the suspended Employees Provident Fund annuity scheme failed to materialise yesterday when the fund's board decided to put it off for another two months.

This is to allow the board to discuss details of the Malaysian Trades Union Congress' proposed pensions scheme.  The decision was arrived at the EPF board meeting that was expected to decide on the fate of the controversial scheme.

EPF said further discussions were necessary in some of the areas covered by the proposal, adding that the suspension of the annuity scheme would continue.  "The board, while noting that there were some positive elements in the MTUC proposal, felt that further discussion was necessary," EPF chairman Tan Sri Abdul Halim said in a statement last night.

He said the board agreed to defer its decision on the proposal as well as the annuity scheme to its next board meeting likely to be held in two months' time.

"The proposal, based on monthly payments of savings over an agreed duration, does not contain elements of an annuity scheme, an insurance product, which is now on hold," he added.   < end of report >

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As extracted from The Sun newspaper report on page 2

'Govt wants final decision soon'

Decide on annuity scheme by next meet, EPF told

KUALA LUMPUR, Tues: The government hopes the Employees Provident Fund (EPF) board will make a final decision on the suspended annuity scheme soon.

"It is hoped that a final decision could be made on whether to continue with the scheme or with some changes, or (for the EPF) to manage it internally," said Deputy Finance Minister Datuk Chan Kong Choy.

The board, at its meeting yesterday, deferred its decision on the matter, thus extending the freeze on the sale of the annuity by insurance companies.  He added that the government would like to see the board make the decision at its next meeting. The meeting is scheduled for Aug 20. < end of report >

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As extracted from The Star newspaper report on page 16

EPF board defers decision on annuity plan

KUALA LUMPUR: The Board of the Employees Provident Fund yesterday deferred its decision on whether the management of its annuity scheme should be privatised or be run in-house.

This decision was taken at a special meeting of the board convened to discuss the report of the consultant appointed to study the scheme. Yesterday's meeting did not reach a consensus on how the scheme should be managed.

The deferment will mean that the freeze on the scheme continues, to allow time for the preparation and submission of alternative schemes. < end of report >

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SUNDAY Star  Sunday May 13, 2001

As extracted from Sunday Star newspaper report by Izatun Shari

Insurance firms told to stop selling EPF annuity scheme

PETALING JAYA: Insurance companies underwriting the Employees Provident Fund (EPF) annuity scheme have been told to stop selling or promoting it following the government's decision to suspend it.

EPF public affairs manager Nik Affendi Jaafar said the participating insurance companies had been informed about the matter, adding that it would not accept new applications from this week.

The companies are Malaysian Assurance Alliance Berhad, MCIS Insurance, Mayban Life Assurance, Hong Leong Assurance, John Hancock Life Insurance and Malaysia National Insurance.

The takaful annuity scheme is managed by Syarikat Takaful Malaysia and Takaful Nasional.

On Friday, MTUC secretary-general G. Rajasekaran lambasted Nik Affendi's statement that EPF would continue to accept applications but it would not process them.

Clarifying this, Nik Affendi said what he meant was that EPF would continue to accept applications which were in the midst of delivery.

He added that EPF would stop accepting new applications by next week.

On why some insurance companies still continued to market the scheme, he said:"The decision was sudden. Probably the message had not gone down to the insurance companies until yesterday."

He said EPF would take action against insurance companies which used the EPF name and logo to sell the scheme while it was being suspended. < end of report >

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The Sun  Thursday May 10, 2001

Headline news as extracted from The Sun newspaper report by K. Ravindran, Sharon Tan and R. Manirajan

EPF annuity scheme deferred, picket off

PETALING JAYA, Wed: The controversial Employees Provident Fund (EPF) annuity scheme has been deferred, prompting the MTUC to put off its nationwide picket planned for Saturday.

This follows the intervention of Prime Minister Datuk Seri Dr Mahathir Mohamad, who in a letter dated yesterday to MTUC president Zainal Rampak, agreed to act on three grievances involving EPF.

One of the grievances is:

• the EPF annuity scheme be deferred pending a consultant study;

Zainal said that those who have participated in the annuity scheme, which requires members to buy units in return for guaranteed payouts on retirement, can ask for a refund. < end of report >

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New Straits Times Thursday May 10, 2001

Headline news as extracted from New Straits Times newspaper report by Annie Freeda Cruez and Chow Kum Hor

EPF annuity plan deferred

MTUC puts off picket after PM's assurance of study by consultants

KUALA LUMPUR, Wed: The Cabinet today decided to defer the controversial Employees' Provident Fund annuity scheme pending outcome of a study conducted by a panel of experts.

Following this, the Malaysian Trades Union Congress said it would put off its May 12 nationwide picketing as the Government's position was conveyed to it by Prime Minister Datuk Seri Dr Mahathir Mohamad in a letter dated yesterday.

"The MTUC wants the scheme to be deferred as one of the conditions to postpone the picket," Human Resources Minister Datuk Dr Fong Chan Onn told the New Straits Times.

The scheme is a retirement programme where workers' contributions, upon agreement, are managed by private insurance companies and given out like pension payments on a monthly basis after they cross 55.

The MTUC is against this. It wants EPF to manage the workers' money instead of giving it to private insurance companies who could make a huge profits.

The Prime Minister, in a letter addressed to MTUC president Senator Zainal Rampak, has agreed in lieu of their appeal to:

• defer the privatisation of workers' retirement scheme through the annuity scheme managed by private insurance companies till completion of study by consultants.

At a press conference held at Wisma MTUC, Zainal who chaired an Emergency General Council meeting, said the members had unanimously agreed to defer the picketing till Aug 9.

Within the three-month period, they would proceed with action on the memorandum sent to the EPF on issues raised by them.

"MTUC accepts the assurance given by the Prime Minister," he said.

However, Zainal declined to say when the letter was handed to him and where, but said that they accepted the the assurance given by Dr Mahathir that the annuity scheme was deferred till the consultant study was prepared.

"The EPF has also agreed that the consultant will meet MTUC officials to get their inputs on the matter. As far as we are concerned, we want the annuity scheme to be handled by EPF and not privatised to insurance companies."  < end of report >

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