KUCHING: Buoyed by higher dividend payouts declared by the Employees Provident Fund (EPF) on Sunday, an economist has suggested a new Malaysian superfund be set up to benefit everyone.
Professor of Economics, Geoffrey Williams, from the Malaysian University of Science and Technology said if this were set up by combining underperforming government-linked investment companies (GLICs), the returns could solve the civil service pensions problem and even provide a universal basic pension for everyone.
“If a new Malaysian superfund, similar in size to EPF, could achieve a payout like in 2024, it could cover civil service liabilities and offer a RM900 monthly pension to 80 per cent of non-civil servant retirees.
“A new Malaysian superfund could even be run by EPF portfolio managers; then, the returns would be as good as these.”
Williams floated the idea after EPF announced a dividend payout of 5.5 per cent for the financial year 2023 underscoring the resilience and effectiveness of its investment approach despite challenging economic conditions.
Williams attributed the performance to an excellent investment strategy executed by the EPF team under the leadership of former CEO Amir Hamzah Azizan, who currently serves as Finance Minister II.
“The EPF dividend at 5.5 per cent is very strong and aligns with my expectations of 5.5-6.0 per cent. This improvement from last year’s 5.32 percent shows commendable performance despite the challenges faced.
“This dividend payout should be satisfactory for most members, offering higher returns compared to fixed deposits and ASB at 5.25 per cent for example,” he said in a statement.
But he feared that because of the EPF withdrawals policy, many may not optimally benefit because their accounts have been depleted.
Williams highlighted that the EPF had also announced (on Jan 10 this year) a RM708 million government additional contribution incentive to 1.4 million EPF members aged between 40 and under 55, with EPF savings of RM10,000 and below in their Account 1 as of Feb 24, 2023.
“This is so that 1.4 million members will get a dividend bonus of RM500 each from this source, but still, they will have virtually nothing in their accounts.
“This is why a Malaysian superfund should be set up to help everyone, even those with no pension savings at the moment,” he said.
He said the total EPF payout for 2023 amounted to RM57.81 billion, accounting for a 13 per cent increase from the previous year’s RM51.14 billion.
As of December 2023, the EPF’s investment assets totalled RM1,135.82 billion, with 62 per cent invested domestically and 38 per cent internationally.
Domestic investments generated 47 per cent of total investment income, amounting to RM31.71 billion, while global assets contributed 53 per cent, generating RM35.28 billion in income.
Williams attributed the robust performance to several factors, including a stable environment with no withdrawals, increased member contributions, and a strategic asset allocation, particularly in overseas markets, which yielded higher returns.
Despite the low returns in domestic equity markets, the EPF’s active strategy ensured optimal returns.
“The performance and shows recovery from the last few years, indicating a sound long-term strategy. Additionally, it allows EPF to retain funds for reinvestment,” he added.
Looking ahead to 2024, Williams expressed optimism, expecting similar returns if EPF can continue implementing its best short-term and long-term strategy without outside interference.
