Combined entity would create a larger fund size, generate greater returns and deliver a complete solution to workers
By P PREM KUMAR & ALIFAH ZAINUDDIN / Pic By AFIF ABD HALIM
The government is considering to consolidate the Employees Provident Fund (EPF) and the Social Security Organisation (Socso), thus creating a single entity to look after the welfare of the country’s millions of workers.
Presently, EPF and Socso separately collect monthly contribution from employees, enhance the value of the monies collected and pay to workers either in the forms of withdrawals, dividends or benefits.
The EPF manages about RM800 billion of funds, while Socso’s fund had risen to RM26 billion last year. The combined entity would create a larger fund size, generate greater returns and deliver a complete solution to workers.
Human Resources (HR) Minister M Kulasegaran (picture) said the ministry is preparing a Cabinet paper on the proposal whether EPF and Socso can be merged into a single entity and operate under one “umbrella”.
Kulasegaran said the ministry has identified that EPF and Socso have many overlapping functions and operating procedures.
“What is more pertinent is whether we can amalgamate Socso and EPF because both of them are doing the same work, like receiving contributions from employees, acting on non-compliance and payments.
“There is no reason for them to be separated. Both play almost the same role,” the minister told The Malaysian Reserve recently.
He said the HR Ministry found such consolidation exercise, if it gets the green light from the government, will remove overlapping agencies and save taxpayers’ money.
But he said any proposal to merge EPF and Socso would be a lengthy process as it involves two large funds. The EPF is a federal statutory body under the Ministry of Finance, while Socso is a government department under the HR Ministry.
Socso was formed under the Employees’ Social Security Act 1969 and was entrusted with the administration of several social security protection schemes which guard employees against contingencies, invalidity or death, including the recently established Employment Insurance System (EIS).
The EPF, the fourth-largest fund in Asia and seventh-largest in the world, has been successful in safeguarding millions of workers’ fund.
Both the EPF and Socso have offices around the country, addressing workers’ needs. Any consolidation, if it goes through, will save millions of ringgit from resources, systems and man- power sharing.
Last year, the Barisan Nasional government had passed the Employees’ Social Security (Amendment) Bill 2015, allowing Socso to acquire and establish private companies.
Under the amendments, Socso is allowed to administer, conduct and manage any project, joint venture, privatisation programme, scheme, enterprises or any other matter which has been planned or undertaken by the organisation.
The EPF-Socso consolidation would give the latter accesses to the pension fund’s investment expertise and generate greater income.
As at end-2017, the EPF had a total of 13.79 million members with 7.11 million active contributors.
It is estimated that Socso has some two million members. However, with the EIS and the new government’s plan to extend the coverage of the social security protection to spouses, the number is expected to double.
The bulk of Socso’s fund is invested in fixed income, money market instruments, equities and real estate with foreign investment accounting only 4% of total fund.
Its two main sources of income are members’ contributions and returns on investments, which account for 71.5% and 27.6% respectively, based on its 2015 annual report.