The Employees Provident Fund (EPF) will likely deliver a higher dividend rate for 2023 should market conditions persist or improve in the second half (H2), said economists.
Bank Muamalat Malaysia Bhd chief economist and social finance head Mohd Afzanizam Abdul Rashid said the EPF has demonstrated its critical competencies in generating investment income via a prudent investment strategy.
“Its active portfolio management has yielded desirable results and continues to be guided by strategic asset allocation (SAA),” he said.
For H1 2023, the fund recorded an investment income of RM33.19 billion, a rise of RM9.44 billion from RM23.75 billion in H1 2022.
The amount was after netting off listed equity write-downs recorded for the period under review, and out of the RM33.19 billion total investment income, RM4.79 billion were generated from mark-to-market (MTM) gains of securities that have not been realised.
The MTM gains were mainly due to foreign exchange rate fluctuations.
Malaysia University of Science and Technology economist Geoffrey Williams said EPF’s H1 2023 results were very strong — a combination of good management, quick capitalisation of returns, and some smart technical adjustments.
“Even if (the performance in) H2 2023 is in line with last year, the overall return should be stronger. So the dividend outlook is good and likely to be better than the 5.35 per cent in 2022,” he said.
Many active members, economic recovery on track
EPF saw an all-time high of 8.47 million active members as of H1 2023. This underscores the economic recovery is on track with more Malaysians being hired, Afzanizam said.
“This is reflected in the decline in the unemployment rate from 3.6 percent in January 2023 to 3.4 percent in June 2023. This means more Malaysians are receiving a steady income from their employment which then translates into higher contributions from the members,” he said.
Williams said the increase in active members was due to people trying to rebuild their accounts after the withdrawals and also due to EPF’s good work raising awareness about the pension crisis.
“EPF is also one of the best investments with regular returns of between 5 percent and 6 percent compared to fixed deposits at barely 3 percent. It is also broadening its products and services to members and its new online app is helping members track their investments more actively,” he said.
In H1 2023, EPF recorded a 36 percent growth in voluntary contributors to 535,307 from 393,966 a year ago. Total contributions accumulated were RM3.93 billion, a 46 percent rise from RM2.7 billion accumulated in the corresponding period a year ago.
The EPF is also reaching out to employers to encourage them to consider contributing more than the statutory 12 percent, or 13 percent for employees earning RM5,000 per month or below.
Williams said the government must consider a non-contributory pension scheme with a new Malaysian Superfund, which could be run by EPF given its strong and successful track record.
“The outreach to employers is well-intentioned but likely to fall on deaf ears. Employers will not be willing to raise their EPF contributions, especially since their wage costs will be rising due to the minimum and progressive wage schemes in the near future,” he said.
However, Afzanizam said such a campaign will promote greater financial literacy, a positive virtue that can help members weather potential adversities in the future.
“We shouldn’t be too rigid by employing a strategy that is one-sided. I’m not sure making it compulsory will solve the problem. The underlying issue is being prudent in financial management and being aware of potential threats arising from the financial scammers,” he said.
