EPF declares increased conventional savings dividend rate of 5.5% for 2023

By SHAUQI WAHAB

THE Employees Provident Fund (EPF) has announced a rise in dividend rates for both conventional and shariah savings accounts for the year 2023, marking an improvement over the previous year’s figures.

In a press briefing today, EPF CEO  Ahmad Zulqarnain Onn disclosed that the dividend rate for conventional savings has been set at 5.5%, while the rate for shariah accounts stands at 5.4%. 

These rates surpass those of 2022, which were 5.35% and 4.75%, respectively.

Ahmad Zulqarnain attributed the increased shariah dividend rate primarily to investments in technology firms, with a special emphasis on the “magnificent seven” stocks.

“Looking at the financial markets, especially in the US, the rate (of conventional and syariah) converged because a lot of the performance was driven by the magnificent seven, which refers to the seven tech companies, including Nvidia which is driven by generative artificial intelligence,” he said.

He also noted that the increase in return in the Syariah portfolio was due to a large number of tech companies.

Attributing the increased rates to the favourable performance of its foreign investments, which constitute 38% of its total assets, he expressed optimism regarding the fund’s financial health.

Compared with previous years, in 2021, dividends for conventional and shariah accounts were 6.1% and 5.65%, respectively.

EPF has a history of fluctuating dividend rates, with the highest ever declared being 8.5% from 1983 to 1987 and 8% from 1988 to 1994.

In terms of payouts to contributors, the total for 2023 amounts to RM57.8 billion, with RM50.3 billion allocated for conventional savings and RM7.5 billion for shariah savings.

This substantial distribution reflects EPF’s commitment to providing returns to its contributors while ensuring financial stability.

He also addressed the proposed EPF contributions for civil servants.

“Given that it is not a policy yet, we cannot say that civil servants are going to be EPF members,” he noted.

He noted the relatively smaller number of new civil servants joining compared to current private sector members.

“If EPF is indeed the statutory body to manage, we do not foresee major changes in how we do business,” he said.

Expert opinions

Financial analyst Dr Geoffrey Williams commended EPF for its 5.5%dividend rate.

“This is very strong and in line with my expectations of 5.5-6.0%,” he told The Malaysian Reserve (TMR).

He emphasised the significance of EPF’s performance, noting that it is better than last year’s 5.32%, underscoring an improvement in performance following a challenging year.

“The dividend payout should be satisfactory for most members, it is higher than a fixed deposit and higher returns with lower risk than ASB at 5.25%, for example,” he added.

Williams also commended the substantial increase in EPF’s total payout for 2023, noting that the total EPF payout for 2023 is RM57.8 billion which is 13% higher than 2022 (RM51.14 billion).

“It reflects EPF’s excellent investment strategy last year under former CEO Amir Hamzah Azizan who is now Finance Minister II.

“The overall results of RM66.99 billion total investment income and RM57.8 billion payout is very strong and shows that a good portfolio management strategy involving domestic and overseas assets can continue to perform even in difficult circumstances,” he said.

He also advocated for the establishment of a Malaysian Superfund, stating that the strong financial results also show that if a separate new Malaysian Superfund of similar size was set up by combining underperforming GLICs, the returns could solve the civil service pensions problems and even provide a Universal Basic Pension for everyone.

Meanwhile,  Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the announced dividend is at fairly respectable rates.

“We have been experiencing a very volatile market last year and if we have a look at the movement of the global stock market compared to the new investments made by EPF, it is mostly in the domestic and of course, the performance in the domestic market will give an impact too,” he told TMR.

He also noted the increase in gross income of more than 20% and the announced dividend is above the inflation rate.

“So generally, the announced dividend is on a respectable trajectory, which is a rising trend compared to previous years,” he commented.