KUALA LUMPUR – Economists have lauded the Employees Provident Fund’s (EPF) increased dividend rate of 5.50% for conventional savings and 5.40% for shariah savings as a testament to the fund’s investment strategy.
Yesterday, EPF announced that the total 2023 payout for both savings comes to RM57.81 billion, which is a 13% rise from RM51.14 billion in 2022 when EPF set a dividend of 5.33% for conventional savings and 4.75% for shariah savings.
Geoffrey Williams, an economist at the Malaysia University of Science and Technology, said that the upped payout can be attributed to strategic investment strategies implemented by EPF in the previous year.
“(The total EPF payout for 2023) reflects an excellent investment strategy last year by the EPF team under their previous chief executive officer, Datuk Seri Amir Hamzah Aziza, who is now finance minister II,” Williams said in a statement.
“The overall results of the total EPF payout and the RM66.99 billion total investment income is very strong, thus showing that a good portfolio management strategy involving domestic and overseas assets can continue to perform even in difficult circumstances.”
The academic added that EPF contributors can expect a similar return this year, provided that EPF is given the freedom to follow its best short-term and long-term strategy “without outside interference.”
As of December 2023, EPF’s investment assets stood at RM1.135 billion, of which 62% was invested domestically while the remaining percentage was invested internationally.
In turn, domestic investments generated RM31.71 billion or 47% of total investment income while global assets saw an income of RM35.28 billion or 53% of the recorded total investment income.
“It is a very good performance and shows recovery from the last few years. The long-term strategy is sound and, in addition to the payout, allows EPF some retained funds for reinvesting,” Williams said.
“The main factors are a more stable environment for EPF with no withdrawals, improvement in members and contributions that raises the investable funds, and good strategic asset allocation – especially in overseas markets which pushed up the returns.”
He noted, however, that because of the previous withdrawal policy, millions of EPF members will be unable to reap benefits as their accounts have been depleted.
“EPF also announced a RM708 million government additional contribution incentive to 1.4 million EPF members aged between 40 and under 55 with EPF savings of RM10,000 and below in their Account 1 as of 24 February 2023.
“So, 1.4 million members will get a dividend bonus of RM500 each from this source, but still they will have virtually nothing in their accounts.”
In March last year, Prime Minister Datuk Seri Anwar Ibrahim’s administration said no more special EPF withdrawals would be allowed despite calls from certain quarters to do so.
This came after withdrawals of about RM145 billion from EPF members’ retirement funds under four separate schemes beginning in 2020 to help households deal with the impact of the global Covid-19 pandemic.
Reiterating his proposal for a Malaysian superfund by combining underperforming government-linked investment companies, Williams said that returns from the initiative could address civil service pension problems while providing a universal basic pension for all.
“If the 2024 EPF payout of RM57.8 billion could be achieved from a Malaysian superfund, it would be enough to pay the full civil service liability and provide a RM900 monthly pension for 80% of non-civil servant retirees,” he added.
For Universiti Tun Abdul Razak economist Barjoyai Badai, who said that the declared EPF dividend rate is “just right,” the public can also expect EPF to capitalise on how Bursa Malaysia had begun to move up last month.
“We can expect EPF to capitalise on this situation to optimise their return on investments in Bursa Malaysia in 2024,” he said, congratulating EPF for announcing a “credible” dividend rate for a relatively challenging time faced in 2023.
“EPF’s higher income was due to overseas investment. Although only 40% of EPF investments were foreign-based, they contributed to more than 60% of EPF’s total income.
“This is due to the better performance of the fixed income investment overseas and the foreign exchange translation income,” he added.
Meanwhile, Global Asia Consulting senior consultant Samirul Ariff Othman said that the EPF dividend payout has “exceeded expectations, given the current gloomy conditions.”
“The returns on conventional and shariah stocks have pleasantly converged this time around,” he added, noting that this could be a strategy to entice EPF contributors to park their funds under shariah savings. – March 4, 2024
