Should you contribute your EPF at 7% or 11%? - Swingvy Blog | Human Resources Blog

Should you contribute your EPF at 7% or 11%? - Swingvy Blog | Human Resources Blog

Not gonna lie, I’ll go with 7% this round!

The government recently announced the EPF reduction rate for employees from 11% to 7% as part of the economic stimulus package.

The announcement was made before the movement control oder (MCO). With the recent covid-19 pandemic, I think you should give it a second thought.

This time is different

This is not the first time we’ve seen this reduction in EPF contributions. The last adjustment was introduced back in 2016 where the rate was adjusted to 8%. I opted to keep it at 11% back then, according to the survey, majority of the Malaysian chose to contribute less too.

With the recent covid-19 pandemic, the impact has caused the shuttered factory, broken supply chains, grounded flights and decimated tourism. Chances are very high that we are indeed heading a global recession.

The EPF is all about saving in general, the number shows that most Malaysians have no savings. But with the current global phenomenon, how will it affect the average Malaysian and what can we do to minimise the impact and survive this pandemic?

What should I consider whether to contribute at 7%?

  1. My EPF tax relief has reached to the max
    • For the year of assessment 2020, the maximum EPF relief is RM 4,000, before YA2019 it was RM 6,000. If your earning is more than RM 4,166 a month, you are probably maximise your EPF tax relief, you may plan the extra 4% in other area.

  2. To maximise other tax relief
    There are other tax relief items you might want to consider to inject your fund into:
    • Investing in a PRS (Private Retirement Scheme) max RM 3,000 tax relief
    • Investing in life insurance, max RM 3,000 tax relief
    • Investing in SSPN-i, max RM 8,000 tax relief

  3. Investment with higher returns
    • You can consider investing into the investments with potentially better returns than EPF returns
    • In a crisis, be aware of the danger–but also recognise the opportunity. The KLCI has hit a new low, which means there are potentially many blue-chip stocks trading at a discount. Besides potentially higher returns, you also gain the benefit of extra liquidity in those investments.


Now is a crucial time, nobody knows what is going to happen next. The additional cashflow from the reduced EPF contribution could come into the rescue in the next few months. However, do avoid lifestyle creep with the additional cashflow, as the deduction rate is only temporary until end of the year.

Find out how you can easily set up the new EPF rate contribution and pay out for your company by using Swingvy payroll.

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