The Employees Provident Fund (EPF) declared a 6.10% dividend for conventional savings and 5.65% dividend for shariah savings for 2021— better than the 5.45% (conventional) and 5% (shariah) declared in pre-pandemic 2019.
Total dividends declared amounted to RM56.72 billion (RM50.45 billion conventional and RM6.27 billion shariah) despite unprecedented Covid- 19-related withdrawals hitting growth in its fund size. This exceeded the previous all-time high of RM48.13 billion in 2017. Total distributable income was RM57.1 billion (RM50.8 billion conventional and RM6.3 billion shariah).
The EPF’s 2021 dividend rate is not only significantly higher than 2020’s rate of 5.2% and 4.9% but also exceeds the five sen per unit income distribution by Permodalan Nasional Bhd’s flagship Amanah Saham Bumiputera (ASB) for 2021.
According to the EPF, its overall investment assets grew to RM1.008 trillion in 2021, up 0.8% year-on-year from RM1 trillion in 2020. The significantly slower growth in its total investment assets, despite strong investment performance, was owing to Covid- 19-related withdrawals, including the unprecedented i-Sinar Account 1 withdrawals totalling RM58.7 billion.
In its statement, the EPF said it saw its first-ever negative net contributions (where withdrawals exceeded contributions) in 20 years of RM58.2 billion in 2021 but did not provide a breakdown of gross contributions and withdrawals for the year.
Some 7.3 million EPF members had applied for at least one or all three of the Covid-19-related special withdrawals — i-Lestari, i-Sinar and i-Citra — that collectively saw RM100.9 billion withdrawn from the EPF between April 2020 and February 2022. The amount not saved with the EPF rises to RM110 billion when including the RM9 billion that was released to members because of the reduction in employees’ statutory contribution rate (from 11% to 7% from April to December 2020, and from 11% to 9% from January 2021 to June 2022).
About 48% of EPF members having less than RM10,000 in their accounts (with the withdrawals). For a three-year period, real (inflation-adjusted) returns were 4.91% for its conventional portfolio and 4.51% for shariah savings — surpassing its target of beating inflation by 2% over a rolling three-year period.
Total gross investment income was RM67.06 billion in 2021, up 6% from RM63.45 billion
in 2020, “driven by a progressive recovery in the equities market and most asset classes amid the global rebound”.
Overseas investments, which account for 37% of its assets but contributed 56% of overall returns, “were critical contributors to its overall performance”.
The continued market recovery in 2021, particularly in developed markets, provided EPF the opportunity to realise some profits. Equities, particularly foreign-listed equities, continued to be a key driver for returns — delivering RM38.93 billion or 58% of the EPF’s gross investment income last year. In line with the broad recovery in the equities market, the EPF said it only saw the need to write down RM1.15 billion from its listed equity portfolio in 2021, significantly lower than RM7.71 billion in 2020.
Fixed income, which made up 45% of its investment assets, contributed RM19.5 billion or 29% of the EPF’s gross investment income in 2021. Its real estate and infrastructure portfolio, which accounted for 6% of its asset base but 12% of gross investment income, continued to be a good inflation hedge. Return on investment (ROI) for the segment was 6.53%, 184 basis points above the 4.69% ROI for its fixed-income portfolio.
Conversely, money markets, which account for 5% of investment assets and allow liquidity management, only brought in 1% of gross investment income in 2021.
It is important for the Government not to allow this retirement fund (EPF) be used for “emergency” purposes. Contributors are aware of their obligations and should abide them. Requests for withdrawals to meet emergencies must be met by alternative Government funding under its own loan/grant programme. A dangerous precedent has been set recently with massive withdrawals.
To restore contributors’ funds, many “hair-brained” schemes have been suggested – tiering dividends, taxing the “rich” contributors to subsidise the “poor” and so forth. None of these should be considered. Responsibility and accountability are key to EPF’s survival, otherwise we face massive withdrawals to the detriment of the fund and the nation.
Reference:
EPF declares dividend of 6.10% for 2021, above the pre-pandemic 2019, Cindy Yeap, TheEdge CEO Morning Brief, March 3, 2022
After first net withdrawal in 20 years of RM58b in 2021, EPF vows to go back to rebuilding members’ savings, Adam Aziz, TheEdge CEO Morning Brief, March 3, 2022
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