The Employees Provident Fund Annuity Scheme (Epfas) will largely benefit the insurance companies but not EPF members, said Consumers Association Penang president SM Mohamed Idris today.

"Many are under the erroneous impression that younger members who opt for the scheme may stand to benefit more as premiums are lower," said Idris, adding that it is not so in reality.

"Overall, the EPF member is better off leaving his money in EPF to earn annual dividends," he said.

CAP said in a statement that the annuity scheme requires contributors to pay the insurance company a lump sum or by instalments. In return, the insurance company will make regular periodic payments to contributors upon their retirement.

There are two types - Takaful and Conventional Annuity Scheme. Takaful requires lower premiums as the monthly income is not guaranteed but will depend on the performance of the insurance company. The Conventional Scheme requires a higher premium as the monthly income is guaranteed.

CAP in a recent study showed the highest rate of return from investing in the scheme is 4.5 percent per annum. The member who leaves his money in EPF enjoys a rate of at least 6.7 percent per annum, which is a conservative average estimate of EPF dividends in the future.

Idris stated that if a member wishes to invest in the scheme at age 20, he has to pay a premium of RM6,150 in order to receive an annual income of RM1,200 at age 55, payable at RM100 a month.

But if that RM6,150 is instead left in EPF, it will increase to RM59,513 when the contributor reaches age 55 because it will be compounding at the rate of 6.7 percent for 35 years, he said.

If at age 55, the member does not withdraw his EPF savings but leaves it with EPF under its Annual Dividend Withdrawal Scheme, he will continue to get a dividend of 6.7 percent per annum from EPF. The interest earned on RM59,513 will amount to RM3,987, which is three times the RM1,200 per annum paid by the scheme (See table).

Epfas vs EPF

Age Life expectancy Sum invested Rate of return Epfas Rate of return EPF Annual income Epfas Annual income EPF 20 75 6,150 3.2 6.7 1,200 3,987 30 76 6,775 4.0 6.7 1,200 2,296 40 76 8,993 4.5 6.7 1,200 1,595 50 77 14,724 4.3 6.7 1,200 1,364 65 78 19,152 3.9 6.7 1,283 1,283

Meanwhile, the five workers' representatives on the EPF board of directors said in a joint statement today that the scheme is good and worthy of consideration provided that the core concerns that had been raised were satisfactorily addressed by EPF and the participating insurance companies.

Zainal Rampak, one of the Workers' Representatives who is also MTUC president, said that the MTUC's core concerns were that the premium was too high and the benefits to beneficiaries were not sufficient.

He also urged all participating insurance companies not to harass or exert pressure on workers to sign up for the scheme.