This article first appeared in The Edge Malaysia Weekly on October 5, 2026 - October 11, 2026

FORMER Employees Provident Fund CEO Tan Sri Shahril Ridza Ridzuan’s suggestion that employers raise their EPF contribution level to help lift the retirement savings of lower-wage earners raised eyebrows as it called attention to his illustration that employers could hypothetically contribute only 4% for workers earning above RM10,000 to compensate for the higher “say 15% or 16%” contribution for those earning below RM5,000 a month.

Speaking at EPF’s International Social Wellbeing Conference (ISWC) 2026, “The Long Horizon”, on Sept 30, Shahril, 56, also noted that raising the EPF contribution rate would not solve the retirement adequacy gap if wages remain low for the vast majority of workers.

“The problem has always been that for the last 50 to 60 years, wages have not grown fast enough in Malaysia. When your base is small, no matter how big the contribution rates, you are not building your retirement savings fast enough,” says Shahril, who was also formerly managing director of Khazanah Nasional Bhd and is currently chairman of Axiata Group Bhd (KL:AXIATA).

Put another way, what he is really saying is that higher wages are necessary for more people to have a better chance at saving for retirement. “We need to have much better progressive policies to make sure the minimum wage keeps up.”

Observers agree that a gradual increase in the minimum wage at fixed intervals, which would allow businesses to plan in advance, would be the better option as there is evidence of lower-income earners not having enough income to cope with the rising cost of living.

Research has shown that more than 70% of EPF savers who prematurely withdraw retirement savings from EPF Account 3 are doing so to pay for their daily necessities or repay debt. That issue of low wages and low capacity for saving also causes a smaller savings pool that reduces the power of compounding interest for the people who probably need it the most.

That is perhaps why Shahril is not in favour of tiered EPF dividends. “Instead of differentiating yields for those with higher balances in EPF and lower balances, what you should do is to start capping contributions of high-income earners to reduce the balance sheet,” he said.

Observers reckon that tiered dividends could spark withdrawals among EPF members with higher savings, potentially affecting the local equity market as well as demand for government bonds.

“The contribution rate suggestion was probably to spark a discussion about how to redress the imbalances between low account balances versus high earners,” says an observer, acknowledging that many moving parts need to be considered before policy can be implemented, including the fact that a large part of the economy has yet to move away from low-cost models to higher-value ones.

Cutting employers’ EPF contribution rate for higher-income earners “is like a higher tax on higher wage earners — a disincentivising welfare system”, says another observer.

Lee Heng Guie, executive director of the Socio-Economic Research Centre (SERC), a think tank of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), recommends careful consideration before making any changes to the minimum wage and EPF contribution rates.

Noting that employers’ contribution to EPF on one’s full salary at 12% or 13%, or even 19%, is deemed part of the overall remuneration package of Malaysian employees during salary negotiation, Lee says there could be unintended consequences on higher-income workers as it is effectively a salary cut if employers do not compensate the affected employees with higher wages, bonuses or other benefits-in-kind. “It could stall career progression or even cause brain drain,” he adds, noting that higher-income workers already pay higher tax rates.

Lee is also in favour of well-communicated and scheduled increases in the minimum wage as well as initiatives by government-linked companies (GLCs) to pay a “living wage” of at least RM3,100.

Employers are already compelled by law to contribute 13% of the salary for those earning below RM5,000 and 12% for those earning above RM5,000 to their employees’ EPF savings as part of the overall remuneration package for private wage earners.

The rate was last changed 15 years ago. Employers’ EPF contribution rate was previously 12% for all wage earners until January 2012, when a higher rate was introduced for those earning below RM5,000 a month — a move that reportedly benefited 5.3 million wage earners, or 92% of the EPF’s active members back then.

Employers enjoy a tax break for EPF contributions up to 19%. Their EPF contribution rate was raised from 5% to 7% in July 1975, to 11% in December 1980 and to 12% in January 1993 (until December 2011), EPF data shows.

Employees’ contribution to EPF has been unchanged at 11% since January 1996, save for temporary decreases during crises, the last being the Covid-19 pandemic when the statutory rate was reduced to 7% between April 2020 and December 2020 and 9% between January 2021 and June 2022. Employees are free to contribute up to 100% of their salary to EPF, on top of the RM100,000 annual voluntary contribution ceiling.
 

Read also:
The State of the Nation: Recasting the age 55 EPF withdrawal into a lifetime pension promise

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