7th February 2023 - 3 min read
Economists have commented that the Employees Provident Fund (EPF) is expected to distribute lower returns this year, although still at an acceptable rate.
According to Professor Geoffrey Williams from Malaysia University of Science and Technology (MUST), the EPF has been managed well thus far with the appropriate investment strategy. As such, it should be able to offer an adequate return rate.
“It looks like the returns for EPF may be lower due to the general financial environment, but the dividend will still be good. EPF members with high savings could expect the return to be good. EPF is still one of the best risk-adjusted long-term investors,” said Professor Williams, although he also noted that it will be tough to top the 6.1% dividend that was declared for 2021 (conventional savings).
Professor Williams also commented that while some pension funds abroad have recently reported losses, the EPF should not suffer the same outcome as the investment strategies used were different. Specifically, the economist was referring to Norway’s Government Pension Fund Global – one of the world’s largest investors – which reported a record loss of US$164 billion for 2022 (-14.1%), citing “very unusual” market conditions. Among some contributing reasons include the ongoing war in Europe, high inflation, and rising interest rates – all of which negatively impacted the equity and bond market simultaneously.
Similarly, Professor Yeah Kim Leng from Sunway University also remarked that the EPF – along with most international funds – will likely report poorer performances in comparison to the previous year. Some may also record losses, as seen with Norway’s sovereign wealth fund. This is primarily attributed to rising interest rates that have battered capital markets throughout 2022.
Assistant professor Dr Liew Chee Yoong of the Centre for Market Education and UCSI, on the other hand, is more optimistic. He believes that the EPF will be able to maintain a payout of 5.5% to 6.5% for 2022. This is as the EPF had an investment income of RM39.3 billion for the first nine months of 2022, which is a decrease of only 18% as compared to the RM48 billion recorded during the same period in 2021.
Last year, the EPF declared a dividend rate of 6.1% for conventional savings, and 5.65% for shariah savings. In turn, the total payout for both conventional and shariah savings came up to RM56.71 billion. Meanwhile, EPF’s historical dividend rates for the past decades have ranged between a low of 4.50% (2008) to a high of 6.90% (2017).
(Source: Free Malaysia Today)
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It should range between 5.5 to 5.8%
Has to be lower than 2022 rare of 6.1% but attractive enough to retain high investors