By Jessica Wee

Despite the negative news pertaining Covid withdrawals which saw an RM101b outflow from EPF (via i-Lestari, i-Citra, i-Sinar), the pension fund is set to top its 2020 dividend of 5.2% for conventional and 4.9% for shariah. All EPF members are hopeful as the article from The Edge Weekly (15 Jan 2022) by Cindy Yeap analyzed the reasons for a higher dividend in 2021, not to mention this bodes well politically as the next general election looms.

On how EPF is able to pay such high dividends while beating current FD rates and inflation, let’s look at their sources of investment income for 9M2021.

EPF is currently managing ~RM989bil (almost a trillion yo!) of total assets and 36% of that AUM (Asset Under Management) has been diversified to invest overseas – think Battersea Power Station in London and etc. Its overseas investment has proved to be effective as it covers more than half (58.2%) of the total 9M2021 investment income, i.e. RM28bil. This is an increase from 49.8% the previous year!

Here is the breakdown of the investment income by asset class for 9M2021:
Equities – brought in RM29.6bil or 62%, an increase of 49% in 9M2020
Real estate and infrastructure – brought in RM700mil or 7%, a marginal increase of 6% in 9M2020
Fixed income – brought in RM14.2bil or 30%, a drop from 42% in 9M2020
Money market – brought in RM3.3bil or 7%, a drop from 6% in 9M2020

On improving political optics, EPF may also be forced to introduce tiered dividend instead of single dividend which it currently practices.

A tiered dividend structure pays a higher effective dividend rate to members with lower savings and pays lower rate to members with higher amount of savings. This will give those who need more help in rebuilding savings for their retirement.

Effectively, those with higher EPF savings will be subsidizing members with lower savings.

Is this fair to those who have worked hard to save for retirement and have paid income taxes throughout their working career for the betterment of this nation? I think not, plus the amount to be received by the lower EPF savers is laughable under this tiered dividend scheme.

Instead of institutionalizing charity, high EPF savers have earned their rights to exercise freedom to their preferred charity!

In rebuilding member’s savings, EPF has launched a pilot scheme with Cagamas – Skim Saraan Bercagar (SSB), to help elderly homeowners (above 55 years old) to fund their retirement by borrowing against the value of their fully paid homes.

This will allow the retiree to receive a steady monthly cash payout through their lifetime. SSB loan is offered at a fixed financing rate of 5% per annum on the outstanding loan amount.

This monthly payout disbursement is a lifetime commitment by Cagamas. Repayment is only due upon the death of the borrower or last surviving joint borrower and there will be no recourse to the estate in the event of insufficient proceeds from the sale of the property to repay the outstanding balance of the SSB loan. Members can apply for SSB at their nearest EPF branch.

Let’s continue to keep our fingers crossed on a higher EPF dividend which will be announced any time between now and March 2022. To further reiterate one of my favourite personal financing strategies, do max out your EPF contribution!

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