PETALING JAYA: Despite projections by economists of a lower Employees Provident Fund (EPF) dividend rate for this year, they said the fund still offers the best investment option for low-risk savings, and that the federal government should not allow another round of withdrawals.
Universiti Utara Malaysia economics professor Dr K. Kuperan Viswanathan said he expected EPF to provide a 5.5% dividend, which is a decrease from last year’s dividend of 6.1%. However, it is still higher than the dividend of 5.2% in 2021.
He said the lower dividend rate is due to the lower global economic growth rates for last year.
In 2022, EPF declared a dividend rate of 6.1% for conventional savings, with the payout amounting to RM50.5 billion, and 5.65% for syariah savings, with a payout of RM6.3 billion.
EPF dividend payouts for conventional savings over the past decade have ranged from a low of 5.2% in 2020 to a high of 6.9% in 2017.
“Despite that, EPF is a low-risk savings platform. The rates contributors get for their savings are good and still competitive. It is a savings platform that offers low risk combined with returns higher than that offered by banks,” he said.
Kuperan advised the government not to allow further withdrawals from EPF despite pressure to do so, as early withdrawals will weaken the fund and reduce its capacity as a premier retirement savings platform.
He suggested that the percentage of contribution to EPF by employers and employees be raised by at least 1% to rebuild retirement savings.
Universiti Malaya economist Datuk Dr Rajah Rasiah said while one would expect a higher dividend to be declared this year as the gross domestic product for Malaysia last year was 8.7% compared with 3.1% in 2021, a lower dividend can be justified because EPF is consolidating the savings.
“If the prime minister (Datuk Seri Anwar Ibrahim) supports a lower dividend, he will be considered as one who is willing to bite the bullet and address other issues, rather than raise his popularity.
“EPF is indeed the safest and soundest source of savings for the people, given the uncertainties facing the market the world over, not just in Malaysia, except that it is largely targeted for use after retirement. These funds are targeted for old age savings by macroeconomists.”
Rajah recommended that the government use other income sources to financially help underserved Malaysians.
“The B40 especially and some M40 members have faced severe decline in their EPF savings. The B40 group should particularly be given alternatives to protect their EPF savings for their old age. I would recommend using other government sources of income to help them,” he said.
On Feb 9, Anwar said his administration does not encourage the public to withdraw more money from their retirement savings.
Following moves by previous governments allowing EPF withdrawals as a way to manage the rising costs of living, Anwar said his government is instead working hard to find better solutions.
“In the past, we were asked to allow contributors to withdraw some money from their EPF savings, but what if they now have only RM10,000 or RM5,000 left? What happens in three to five years when they retire? I know it’s their money, but if you take all the money out, then what about the children and your future? That’s why I feel we must find different ways to alleviate the people’s burden.”
