Given The High Returns More Are Likely To Save In Epf Says Economist

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The EPF has declared a 6.3% dividend for conventional and shariah accounts but only contributors with high savings will benefit, according to an economist.
PETALING JAYA: Higher dividends from Employees Provident Fund (EPF) savings will encourage contributors to put aside more money for their retirement fund, according to an economist.
On the other hand, Geoffrey Williams said, only those with a “good level” of savings will enjoy the benefit, effectively leaving out millions whose savings are still at a very low level.
Williams pointed out that people tend to invest more in schemes with higher returns, especially if they are also low-risk, like the EPF.
“And unlike other investment schemes, such as unit trusts, contributors cannot lose their EPF savings,” he told FMT.
On Saturday, the EPF declared a 6.3% dividend for the year 2024, for both conventional and shariah accounts, with a total payout of RM73.24 billion.
Its chairman, Zuki Ali, attributed the higher dividend to a diversified investment strategy that enabled the retirement fund to capitalise on growth opportunities, thus optimising returns and reinforcing the long-term financial security of its contributors.
The EPF dividends have been trending up over the past three years. For conventional accounts, it was 5.35% in 2022 and 5.5% in 2023. For shariah accounts, it was 4.75% in 2022 and 5.4% in 2023.
EPF CEO Ahmad Zulqarnain Onn said there was also a 33% increase in the number of voluntary contributors, rising from about 902,000 in 2023 to 1.2 million last year.
Williams pointed out that for each individual contributor, the greater his funds, the higher will be the returns, especially considering the compounding effect.
“And this gets them to the targetted adequate savings level quicker,” he added.
With more contributors, Williams said, the fund would also be able to invest more across a diversified portfolio.
He said those with higher savings will benefit more from the higher dividend.
As at the end of 2023, about 35% of EPF contributors (about 5.6 million individuals) had less than RM10,000 in their savings by the age of 54, according to then deputy finance minister Steven Sim.
“These are the people who are not included in this ‘fortunate group’,” Williams said.
Another economist Rajah Rasiah, said that given the high dividend given by EPF, it would be better for Malaysians to raise their contributions to the fund instead of keeping their money in private retirement schemes.
“It is a better option not just because of the higher rate, but also because of the security it provides compared to private retirement schemes,” he told FMT.
Rajah suggested that the government consider raising dividends further, given that EPF withdrawals are now more regulated, and that it has a wider range of investment targets, including blue chips.
“That will not only make the instrument fairer but also reflect its social responsibility,” he added. - FMT

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