Employees Provident Fund contributors are being advised to carefully consider the risks before withdrawing their retirement savings to invest in unit trust funds.

Universiti Sains Islam Malaysia Faculty of Economics and Muamalat lecturer Professor Dr Nuradli Ridzwan Shah Mohd Dali said EPF dividend returns of around 6% are already considered strong, especially when compared with conservative or moderate-risk unit trust funds.

EPF Returns Comparable To Conservative Unit Trust Funds

According to Nuradli, conservative and moderate unit trust funds typically deliver returns of about 6%. As a result, moving savings out of EPF into investments with a similar risk profile may offer limited benefit.

He was commenting on reports that EPF is expected to declare dividends for 2025 of between 5.8% and 6.3% for Conventional Savings and between 5.5% and 6.0% for Shariah Savings. If dividends fall within this range, he said EPF returns would remain competitive for long-term savers.

Preserving Savings More Important For Those Nearing Retirement

Nuradli said EPF savings should be maintained, particularly by contributors who are close to retirement age. For this group, preserving capital is more important than chasing higher returns.

He added that a return of around 6% is generally sufficient for those nearing retirement, as taking on additional risk could expose savings to unnecessary losses.

Younger Contributors Face Different Risk Considerations

The situation may differ for younger contributors, who typically have more time to recover from investment losses and may be more willing to take on higher risk.

However, Nuradli cautioned that unit trust investments, especially aggressive funds, are not guaranteed to deliver positive returns. Poor fund performance can result in reduced capital or negative returns, unlike EPF savings, which are generally more stable over the long term.

He stressed that financial knowledge is essential before making any investment decision. Without a clear understanding of how investments work, contributors may suffer losses without knowing why.

Public Views Reflect Mixed Opinions

Public opinion remains divided on whether EPF Account 1 savings should be used for unit trust investments.

Private-sector banking employee Othman Jalaluddin Abdul Rahman, 43, said he prefers to leave his EPF savings untouched, noting that existing dividend returns are consistent and offer greater security than many alternatives.

For someone in his 40s, he said the risks of withdrawing EPF savings are higher, although younger contributors may see the option differently. Even so, he cautioned against withdrawing all retirement savings for investment purposes.

What This Means For Retirement Planning

The comparison between EPF dividends and unit trust returns highlights a clear trade-off between stability and risk. EPF offers relatively steady returns with capital protection, making it suitable as a core retirement savings vehicle, especially for older contributors.

Unit trust investments may offer higher potential returns, but they also carry the risk of losses, particularly during market downturns. For younger contributors, limited exposure to higher-risk investments may be more manageable due to a longer investment horizon, but this still requires a clear understanding of risk.

Overall, the discussion reinforces the role of EPF savings as a long-term safety net, while other investments are better funded using surplus income rather than money set aside for future retirement needs.

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