[KUALA LUMPUR] Malaysia’s Employees Provident Fund (EPF) announced its highest dividend payout of RM57.8 billion (S$16.4 billion) for 2023, comprising a 5.5 per cent dividend for members under the conventional savings account and 5.4 per cent for members under the syariah savings account.

At a media conference on Sunday (Mar 3), EPF chief executive officer Ahmad Zulqarnain Onn said the real dividend (after netting off the inflation rate) for conventional savings accounts members was 2.89 per cent and 2.51 per cent for syariah account members.

As at end-2023, EPF had 8.5 million active members – 6.7 million under the conventional savings account, with the remaining under the syariah savings account.

The latest dividend payout of the conventional savings account (5.5 per cent) was higher than the 5.35 per cent for 2022, but lower than its historical high of 8.5 per cent from 1983 to 1987.

The dividends were announced on the back of a total investment income of close to RM67 billion, a 29 per cent increase from RM51.9 billion in 2022.

The EPF’s total fund size has also grown by 13 per cent to RM1.1 trillion in 2023, driven by improvements in investment income and collection contributions.

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In terms of investment allocations, 62 per cent of the fund was invested domestically and generated RM31.7 billion or 47 per cent of total investment income.

Global assets, which stood at 38 per cent of EPF’s total investment, contributed RM35.3 billion or 53 per cent of the total investment to the largest pension fund in the country.

“Foreign markets, especially the US, were performing strong last year, mainly driven by the outperforming tech stocks in the S&P 500 index. This has generated higher returns to EPF,” Zulqarnain added.

Even though foreign investment generates higher contributions to the pension fund, Zulqarnain said EPF will continue to observe the market condition and may not increase its foreign investment or consider investing in other digital assets.

“We are looking at investing in businesses that have cash generation capability,” said the 52-year-old chieftain, who assumed the position on Feb 19 after his predecessor Amir Hamzah Azizan left to take up a new role as Malaysia’s second finance minister.

The move is aligned with Prime Minister Anwar Ibrahim’s call for EPF to increase its domestic direct investment to 70 per cent, to help boost the country’s economy.

In EPF’s portfolio, the equities asset class contributed RM39.5 billion, or 59 per cent of the fund’s investment income, higher compared to the RM30.5 billion in 2022.

The equity asset class constitutes 42 per cent – 38 per cent public equity and 4 per cent private equity – of the fund’s total assets under management (AUM). Public equity contributed RM34.3 billion in investment income, while private equity was at RM5.1 billion.

Fixed income, which constitutes 46 per cent of AUM, contributed RM19.7 billion or 29 per cent of gross investment income, while real estate and infrastructure’s contribution stood at RM6 billion or 9 per cent.

The money market segment contributed RM2.2 billion or 3 per cent of EPF’s investment income.

Expanding retirement coverage

Other than increasing income generation, Zulqarnain said the lack of retirement coverage has been an issue for Malaysians.

The current retirement coverage stands at 60 per cent, lower than the global average of 68 per cent.

“Out of the 17 million people in Malaysia’s labour force, 40 per cent of them are not covered for retirement. Some of them are small-business owners, such as contractors or hawkers, and gig workers,” he added.

As at end-December 2023, 39 per cent of all EPF members aged 55 and below do not have sufficient basic savings for retirement.

Based on the EPF Basic Savings Quantum, every prospective retiree should have at least RM240,000 as a minimum at 55 years old, which allows them to spend RM1,000 monthly for 20 years.

To help members build future income security, he said several initiatives have been introduced, including promoting voluntary contributions, and allowing members to use part of their funds to purchase life and critical illness insurance..

In 2023, the number of members who made voluntary contributions increased 17 per cent to 905,923, as compared to 772,687 in 2022.

“EPF will continue to support the implementation initiatives that seek to catalyse the accumulation and strengthen members’ retirement income, with a view to helping EPF members achieve a dignified retirement,” Zulqarnain said.