EPF Dividend Projected to Slide

Economists have projected that the Employees Provident Fund (EPF) will announce a lower dividend rate of between 4.5% and 5.2% for 2015 compared with 6.75% for 2014 on weaker investment climate due to slower global and domestic economic growth.

EPF recorded RM39.08 billion gross investment income for financial year ended Dec 31, 2014. The 6.75 per cent dividend amounted to a total payout of RM36.66 billion where RM5.41 billion was required to pay every one per cent of dividend rate for 2014.

Its investment incomes for the first three quarters of 2015 have totalled RM31.58 million. Its expected investment income for 2015 is likely to surpass its RM39.08 billion gross investment income for financial year ended Dec 31, 2014.

On Nov 20, EPF announced investment income of RM9.54 billion for the third quarter of 2015 (Q3 2015) ended Sept 30, 2015, a year-on-year decline of 7.58 per cent. EPF announced an investment income of RM11.41 billion for the second quarter of 2015 (Q2 2015) ended June 30, 2015.

As at Q1 2015, the EPF’s total investment assets stood at RM667.21 billion, an increase of RM30.68 billion for the first six months of 2015. It announced an investment income of RM10.63 billion for the first quarter ended March 31,2015.

However, economists said it would be extremely difficult for EPF to meet the year 2014 dividend rate under the current economic scenario.

“Given the current weak climate, a dividend of 4.5% to 5% would be a commendable return,” The Malaysian Reserve (TMR) quoted Malaysian University of Science and Technology dean of business Dr Yeah Kim Leng as saying.

“There were so many negatives last year. Asset prices fell and most hedge funds had weaker performances. It would likely be the same for EPF,” Prof Dr Hoo Ke Ping, a prominent economist and investment advisor, told TMR.

“A dividend of 4.8% to 5.2% will be considered good. It is important to note that this will be better than what bank deposits offer, which only range around 3%.”

Private sector workers are hoping for a higher dividend payout by EPF this year to cope with the rising cost of living and the impact from the Goods and Services Tax (GST), said the Malaysian Trades Union Congress (MTUC).

MTUC deputy secretary-general A. Balasubramaniam said the majority of the 10 million private sector workers were looking forward to a better dividend from the fund as it was the only source of savings for them.

“We have more than four million active contributors in EPF. Higher dividend would add more value to their retirement savings,” he said. “Private sector workers from the lower income group have to contend with the hike in public transportation fares and higher toll rates for certain major highways in and around the Klang Valley.

“These factors had impacted the lifestyle of workers as they hardly could save from their monthly wages and as such, EPF is the only savings they could keep for their retirement.”

There have been proposals for the authorities consider lowering the monthly EPF contribution to improve household disposable income. Another suggestion is to allow the recently retrenched to withdraw from their EPF accounts.

The reduction of workers’ EPF contributions is nothing new. From January 2009 until December 2010, employees were allowed to opt to reduce their monthly EPF contribution from 11% to 8%. The employers’ 12% contribution remained the same. The contribution rate was also reduced twice earlier – once in 2001 and the other in 2003.