EPF no to retrenchment benefit

I WILL be retrenched by my company before the end of the year. The company has informed that it will be paying retrenchment benefits accordingly.

I had planned on depositing my benefits into my EPF account. But when I checked with the EPF, I was informed that the retrenchment benefit cannot be deposited into my EPF account as they were concerned about the funds being sourced from “black money” or illegal funds.

I am deeply disappointed with the EPF’s stand, especially given the following excerpts from its official website:

“Overview – EPF is a social security institution which provides retirement benefits for members through management of their savings in an efficient and reliable manner.” Aren’t retrenchment benefits considered a form of “savings”?

“Our Vision – Helping members achieve a better future.”

“Our Mission – Safeguard members’ savings.” Wouldn’t accepting the retrenchment benefit as contribution constitute helping members achieve a better future?

“Our Quality Policy – Committed to continuously provide quality and innovative services to fulfil our customer needs.” Can’t the EPF be “innovative” or flexible enough to accept the retrenchment benefits as an existing member’s contribution?

Further, the EPF Act states: Section 44 – Remittance of funds in connection with retirement;

44. (1) In addition to section 43, an employer or any other person may at any time, with the consent of the employee, remit to the Board –

(a) any funds being retirement benefits of the employee; or

(b) any funds from any other retirement scheme or plan relating to the employee, in any manner as may be prescribed by the Board.

(2) An employee or any other person may at any time remit to the Board any funds from any retirement scheme or plan relating to the employee or person in any manner as may be prescribed by the Board.

Would not the retrenchment benefits constitute a form of retirement benefits received by an employee?

Section 44A: Adding up credit into the account of a member of the Fund;

In addition to sections 43 and 44, any person prescribed by the Board may add up credit into the account of a member of the Fund by remitting a sum of money to the Board, subject to any terms and conditions as prescribed by the Board, and any maximum limit of monthly contributions set out in the Third Schedule.

When the EPF is continuously reminding and encouraging members to plan and save for their future, why then the contradiction in non-acceptance of retrenchment benefit as a member’s additional credit to their EPF account?

Surely this would fit in with the EPF’s vision and mission of helping members achieve a better future and assisting to safeguard members’ savings?

The following excerpts also have reference to this matter: “The Employees’ Provident Fund (EPF) is calling for the Government to increase its contribution in the 1Malaysia Retirement Savings Scheme (or SSP1M) to cater to the increasing growth of labour in the ‘gig economy’.

“We want the Government to increase that amount (of contribution) to incentivise people to subscribe to the scheme,” EPF chairman Tan Sri Samsudin Osman told reporters in a press briefing at the International Social Security Conference 2017.

SSP1M is a government initiative to ensure that self-employed individuals without fixed monthly income have a savings plan upon reaching retirement age.

EPF deputy chief executive officer (Strategy Division) Tunku Alizakri Raja Muhammad Alias has said that since there is no formal protection system for the self-employed who falls under the gig economy, there is a growing concern for a savings plan for when they retire.

“EPF sees the exponential growth in the gig economy. That’s why we need to make sure that people understand the importance of retirement and how to prepare as early as possible. So financial literacy is a key sector,” Alizakri said.

“A lot of people are making a lot of money in the gig economy for now, but the thing is if they don’t understand that they need to also save for the future, then they will be in trouble when retirement comes.”

So with such statements, the question remains: Why is the EPF not accepting retrenchment benefits as an allowable contribution by members, especially since the source of such funds can be verified as clearly not falling under the “black money” or illegal funds category?