Finance Minister: EPF Dividend Could Have Been 6.7% For Conventional Savings

Alex Cheong Pui Yin

14th March 2022 - 2 min read

Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz has commented that the Employees Provident Fund (EPF) dividend for 2021 could have hit 6.7% for conventional savings, if the government had not made allowance for Covid-19-related withdrawals over the past two years.

“Actually, I never said this previously, that without the withdrawals, dividend rates for EPF conventional savings for 2021 supposedly could touch 6.7% compared to the 6.1% which was announced recently. The loss of the RM5.4 billion (dividend) has resulted in 5.3 million EPF members who previously did not make any withdrawals via any withdrawal schemes, have to receive low dividend rates,” said the minister at a parliament session today.

Tengku Zafrul was referring to the three EPF withdrawal facilities – namely i-Lestari, i-Sinar, and i-Citra – that were previously rolled out to offer financial relief to Malaysians who were struggling from the pandemic and subsequent movement control orders (MCOs). Consequently, a total of RM101 billion in savings was withdrawn, causing fresh concerns of old-age poverty as 6.1 million members now have less than RM10,000 in their EPF accounts for retirement.

Tengku Zafrul’s comments came following renewed calls from some parties that urged the government to allow “one last EPF withdrawal”. These include the Federation of Malaysian Consumers Associations (FOMCA) – whose president Marimuthu Nadason said that those struggling may go to loan sharks or unlicensed and illegal moneylenders if not offered a financial lifeboat – as well as a few other Parliament members.

Tengku Zafrul also explained that if another one-off withdrawal of RM10,000 is allowed, it is expected 6.3 million eligible members will do so – which will then result in another outflow of more than RM63 billion. “If the additional withdrawals were allowed, the EPF will have to carry out portfolio rebalancing, and the impact may be more than the withdrawal value of RM63 billion,” he further said.

In fact, the EPF may even need to sell more overseas investment assets to cover the withdrawal value, especially with the ongoing Russia-Ukraine crisis. On top of that, the move would have a continuous negative impact on the local stock and bond markets, and borrowing costs for the government in the future may also increase significantly, said Tengku Zafrul.

(Sources: Malay Mail, The Edge Markets)

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Alex Cheong Pui Yin

Previously covered recruitment-related stories and had a short stint as a copywriter for the property industry. She subsequently developed an interest in investment and robo-advisors.

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