[UPDATED] EPF declares 5.35% dividend for conventional savings, lower than 6.1% in 2021

KUALA LUMPUR – The Employees’ Provident Fund has declared a 5.35% dividend for conventional savings and 4.75% for shariah savings for 2022.

This involves a payout of RM45.44 billion for conventional savings and RM5.70 billion payout for shariah savings, bringing the total payout amount to RM51.14 billion.

“As of December 31, 2022, EPF recorded a lower total gross investment income of RM55.33 billion, compared to RM68.89 billion in 2021, driven by high market volatility and lower valuations across equity and fixed income markets,” EPF said in a statement today. 

The crediting of the dividends for both savings will be completed today. Members may check their accounts via i-Akaun or get their statements from EPF’s self-service terminals nationwide.

However, this is a marked decrease from 2021’s dividends – 6.10% for conventional savings and 5.65% for shariah savings.

According to EPF chairman Tan Sri Ahmad Badri Mohd Zahir, the RM51.14 billion payout will benefit more than 15 million EPF members, which include members from the informal sector who are registered under i-Saraan – an incentive-based voluntary contribution programme.  

“God willing, despite the persistent global market downturn in 2022, the EPF investment portfolio maintained its resilience and responded with minimal impact. 

“This was largely due to our overarching strategy that emphasises long-term sustainability of investments and returns, in line with EPF’s Strategic Asset Allocation (SAA).”

“The RM51.14 billion payout will benefit more than 15 million EPF members, which include members from the informal sector who are registered under i-Saraan, an incentive-based voluntary contribution programme,” he said.

Notwithstanding the weak performance of the equity markets, he added that not all sectors were affected as some, such as energy, plantation, financial services, and consumer staples, fared reasonably well compared to other sectors. 

As recently announced in the Budget 2023, the government has raised this maximum amount from RM250 to RM300 per annum as a continuous incentive for i-Saraan members to ramp up their retirement savings.

Overall, the total contribution amount during 2022 increased to RM84.78 billion, an improvement of 16% from 2021.  

Evidence of the strong rebound in domestic economic activity can also be seen from the growth of EPF’s employer data where new employer registrations were recorded at 93,669 as of end of 2022, bringing the total number of employers registered with the EPF to 588,714.

“We anticipate that the 2023 investment climate will continue to be challenging in the short and medium term. The continuing uncertainty underscores the need for a thoughtful approach that focuses on building resilience while aligning with EPF’s long-term investment objectives in accordance with our SAA.”

EPF will also be enhancing the current business model by fully separating the shariah assets from investing alongside shariah-compliant assets in conventional savings.

EPF’s investment portfolio in 2022

For 2022, the EPF recorded a gross investment income of RM55.33 billion, with RM6.83 billion allocated to shariah savings. The equities asset class contributed RM30.54 billion, or 55% of the EPF’s total gross income, lower compared to the RM41.06 billion recorded in 2021. 

Foreign-listed equities, which yielded a return on investment (RoI) of 9.27%, continued to be the driver of returns for this asset class.

The private equity portfolio also demonstrated strong performance, recording an RoI of 13.65%. This portfolio generated lower gross investment income compared to 2021, largely due to lower valuations of the underlying assets, apart from lower distributions received for the year.

EPF also took the prudent measure of writing down RM3.43 billion of its listed equity portfolio in 2022, which was higher than the RM1.15 billion write-down recorded in 2021, in line with the volatility in the equity markets. 

A total of 74% of the total amount came from shariah-compliant counters that underperformed, which in turn impacted EPF’s shariah savings performance for the year.

With almost half of the EPF’s total asset allocation in fixed-income instruments, comprising Malaysian Government Securities and Equivalent, as well as loans and bonds, the retirement fund was able to maintain steady returns. 

Income from the portfolio contributed RM18.19 billion, or 33% of the EPF’s total gross income. The lower income recorded compared to 2021 can be attributed to lower capital gains driven by increasing yields.

The real estate and infrastructure portfolio’s income of RM5.56 billion continued to play a role as a hedge against inflation, recording an RoI of 10.50%, a spread of 6.13% above the RoI for fixed income instruments of 4.37%; whereas income from money market instruments came in at RM1.04 billion with an RoI of 3.48%. The performance of these two asset classes is in line with the return expectations set by the SAA.

Despite the numerous macroeconomic challenges and the pandemic-related withdrawals totalling RM145 billion, the EPF’s investment assets remained intact and closed at RM1,003 billion in December 2022. 

By broad asset class, fixed-income instruments made up 47% of investment assets, while equities comprised 42%. real estate and infrastructure as well as money market instruments made up 7% and 4% of EPF assets, respectively.

The EPF’s diversification into foreign assets and currencies allowed it to realise additional gains with profits from non-ringgit sources and added value to the retirement fund’s overall return. As of December 2022, foreign investment made up about 36% of the EPF’s investment assets and contributed 45% of the EPF’s total gross investment income.

Positive growth of EPF memberships

In its 2022 performance results, EPF reported a positive rebound in member registrations following the robust recovery in the Malaysian labour market. 

This helped the fund to record strong growth of new member registrations of 635,989, bringing the total number of EPF members to 15.72 million as at December 2022. 

Of that, 8.39 million were active members, representing 50% of Malaysia’s 16.7 million labour force as of the end of 2022.

“However, the percentage of active members over the total labour force is still relatively low in comparison to the level of old-age social protection coverage globally and as such, the EPF is rolling out initiatives and ramping up its efforts to increase the coverage of the nation’s labour force to more than 60%,” said Ahmad Badri. – The Vibes, March 4, 2023