EPF’s Decent Dividends in a Difficult Year!

The Employees Provident Fund (EPF) has received praise for declaring relatively high dividend rates for 2022 despite the challenging financial environment over the past year.  EPF declared a 5.35% dividend for conventional savings and 4.75% for shariah savings. A real return of 2% (with inflation at 3.3% in 2022). This compares with the 6.10% for conventional savings and 5.65% for shariah savings declared for 2021.

However, the total current savings of the B40 group is a mere 0.7% of the total, or RM7.7 billion, in the fund. The 6.29 million EPF members in the B40 group only have an average of RM1,255 in their savings.

Source: www.kwsp.gov.my

In contrast, the T20 category, who also make up 3.14 million (20% of the total number of members), owns 83% or RM818 billion of the savings in EPF, totalling RM984 billion. On average, they have RM260,205 each. That’s no fault of theirs!

As for the M40 group, which makes up 40% of the total number of contributors or 6.29 million, they only have 16% or RM159 billion of the total savings in the fund. On average, each of them only has RM25,268.

These numbers reveal how most Malaysians are going to struggle in their old age. The racial profile of the EPF members also has some worrying indicators.

Malays/Bumiputeras, who make up 9.52 million members, have an average savings of RM35,000. But, as announced before, about 70% of them have savings of below RM10,000. The total held by this group is RM333 billion, or 33% of the total.

The Chinese, on the other hand, make up 4.29 million members, with an average savings of RM129,888 each. Their total is RM557 billion, or 66% of RM984 billion. As for Indians, there are 1.3 million members, with an average savings of RM62,769, with a total of RM81 billion.

By all accounts, the survival of the millions of private sector employees, who are in the lower-income category and mainly dependent on EPF, has come under scrutiny.

The attitude of Malaysians towards savings and working to be independent after they retire is a problem. EPF is a retirement fund, not an emergency fund. If the Government wants to be benevolent then have a separate “Emergency Loan Fund”, which is separate and administered by BNM and selected banks. The rate is concessional (2%) and for 7 years. We cannot have a mixture in a retirement plan. An ex-PM started this withdrawal scheme and confused people on the role of EPF.

References:

All-round praise for EPF’s ‘decent’ dividends, Reshna Reem Ganesan, FMT, 4/3/23

Shockingly low EPF figures should alarm govt, K. Parkaran, FMT, 5/3/23