A Layman's View of Budget 2010

Budget 2010 has been revealed by our Prime Minister this afternoon and many measures have been announced. In this article, I will focus on the measures to be implemented next year that have direct impact on the welfare and financial health of normal working people:

1. Maximum income tax rate has been reduced from 27% to 26% for chargeable income of more than RM100,000
2. Personal tax relief has been increased from RM8,000 to RM9,000
3. Tax relief for broadband subscription fee up to RM500 from year 2010 to 2012
4. 5% real property gain tax (RPGT) from Jan 1, 2010, except the house gift from parent to child, husband to wife, and grandparent to grandchild.
   
5. RM50 service charge for every principal credit/charge card, including free for life card. RM25 service charge for each supplementary card from Jan, 2010
   
6. RM10,000 tax for each approved permit (AP) issued to open AP holders
7. New fuel subsidy management system by early 2010
8. New EPF scheme to use current and future savings in Account 2 to purchase higher value house or additional house
9. New 3 billion 1Malaysia sukuk with 5% returns for Malaysians age 21 and above
10. 1Malaysia retirement scheme for self-employed, to be run by EPF. For every RM100 contribution, the government will subsidize 5%, up to RM60 per year, for a maximum of 5 years
    
11. Netbook with free Internet subscription will be available for tertiary students for a fee of RM50 for 2 years
12. Civil servants are eligible to apply for computer loans once in every three years and up to a maximum of RM5,000 from the government once in every five years
13. Employees EPF contributions will be raised again to 11 per cent on a voluntary basis with immediate effect. However, from Jan 1, 2011 employees' EPF contribution will revert to 11 per cent.
14. Personal tax relief for EPF contribution and life insurance premiums to be increased from RM6,000 to RM7,000. The 1k increase can be only use for retirement annuity insurance premiums.
    
15. For tertiary students with PTPTN loan, the loan will be converted to scholarship if the students secure first class degree
16. Local and foreign knowledge workers in Iskandar Malaysia will be subjected to only 15% income tax
    

Should I Review My Insurance Coverage Amount After Retirement?

In the previous article, I talked about reviewing our insurance coverage plans/riders after our retirement. In this article, I'm going to talk about reviewing our insurance coverage as well, but the focus in on reviewing the coverage amount.

Let's look at each of our insurance plan/rider as below:

• Life/Permanent Disability (TPD) - If you have stand alone life/TPD insurance, by all means reduce the coverage amount to a bare minimum. Why do i say so? As mentioned before, life insurance is for you to provide for your family. Assuming that your children are all financially independent, the need of having large life coverage has diminished. If you have medical/critical illness rider attached to a life policy, reduce it to an amount that can sustain the cost of insurance for having these riders.
• Critical Illness - Please maintain or even increase the amount covered so far as dreaded illnesses might hit you in the old age and critical illness plan/rider will provide you with a good sum for treatment.
• Hospitalization & Surgery - You should NOT reduce the insurance coverage for this plan/rider as the chances of hospitalization are much higher when we grow older.
• Personal Accident - You should think of increasing the sum assured for personal accident since the likelihood of having accidents/body injury are much higher when we are old. Besides, personal accident plan/rider is rather inexpensive.

In short, we can reduce the coverage amount for life/TPD insurance but MUST maintain/increase the coverage amount for any plan/rider that is related to critical illness/hospitalization/accidents.