Private sector against TAP hike
BANDAR SERI BEGAWAN
PRIVATE sector employers and employees in Brunei are against any increase in mandatory contribution to the Employees Trust Fund (TAP) in light of the current economic climate as concerns were raised on the impacts of such an increase on the low-income earners.
During the ongoing 12th Legislative Council (LegCo) session, Second Minister of Finance Yang Berhormat Pehin Orang Kaya Laila Setia Dato Seri Setia Hj Abdul Rahman Hj Ibrahim said that detailed studies must be done on the financial capabilities of low-income earners to contribute a higher percentage of their monthly salary and the rise in cost of living over the long-term.
This was in response to a question by LegCo member Yang Berhormat Hj Zulkipli Hj Abd Hamid who raised concerns about whether Bruneians will have sufficient retirement funds at the current rate, highlighting the lack of active saving by nearly half of the population.
Nina, who works for a major local distributor of consumer goods, believed that the current contribution rates are already sufficient to cover the cost of living while in retirement.
“Assuming that I do not spend an elongated period of time unemployed in the future, I would say there is no need to hike the current TAP contribution rates as they are enough for me to retire with a simple life at 60 years old,” said the woman in her mid 20s.
“Personally, I have always maintained personal savings of half my monthly salary ever since I started working and I do not saddle myself with loans or debts so I feel that I am fine with the current TAP contributions under my current circumstances,” she said.
Working locals and permanent residents are currently required to contribute five per cent of their monthly salary to TAP, and another 3.5 per cent to the Supplementary Contributory Pension (SCP) which would be used to fund their pensions upon retirement.
Nurul, who works for Royal Brunei Airlines believed it is the responsibility of the individual to ensure that he or she has enough to sustain him or herself in retirement.
“Having been both a low-income earner in my younger days and a middle-income earner now, I believe people must learn to survive, not outspend themselves and save for the future regardless of a hike in contribution,” she said.
“Although a hike in TAP contribution rates might hurt the low-income households who are barely surviving, it is not the only factor that affects the cost of living as there are many other expenses that could rise or fall at any time so any hike should not be used as an excuse,” she said.
Muhd Hafiezul Isa, who works in the oil and gas sector, believes that such a hike should not be forced on everyone to make it fair.
“For me the current rates are already sufficient for Bruneians but I would accept a hike if the rationale behind it is properly explained to the public in the best interests of the country,” he said.
“However, since any hike would most likely hurt the low-income earners the most, it would be better not to change the current rates so that there are no qualms about the fairness of such a move,” he said.
Muhd Hafiezul also said that people could make voluntarily contributions on top of their mandatory contributions so any increase should be left to the discretion of the public.
A local businessman felt that any discussions of increasing TAP contributions should be put on hold due to the current economical climate.
“Let us just maintain the contribution rates until better days because saving too much money will not create the demand among consumers that will help in economic growth or recovery,” said the 55-year-old restaurateur.
A personal financial consultant at a local bank, who opted for anonymity, estimated that for young adults who are just transitioning into the working world, their pension fund in around 35 years from now should be about half a million dollars in order for them to retire comfortably.
“The inflation rate and cost of living will always rise so retirees of the future should aim for that figure to live the last two decades of their lives comfortably, although of course the spending habits of each individual is different,” she said.
She also said that the figure is just a prudent estimate and by no means a rule of thumb.
“Personally however, I feel that the current rates will not be enough for the average Bruneian to attain that estimated figure but an increase in the rates will only decrease their spending power so a study needs to be done to determine the best trade-off point in any rate hike,” she said.
The Brunei Times