Sunday, 11 February 2018

(The Star) Highest EPF dividend in two decades

PETALING JAYA: The Employees Provident Fund (EPF) has declared a dividend rate of 6.9% for conventional savings, the highest ever announced in the last two decades.

For the estimated 6.8 million active contributors to EPF, this is no doubt delightful news as the dividend rate which came this close was in 1999 (6.84%).

“We are very pleased with the overall performance in 2017, which is also a landmark year for the EPF as we are now managing two savings schemes and declaring two dividend rates,” said EPF chairman Tan Sri Samsudin Osman.

Aside from the conventional savings, he was referring to the shariah savings for which EPF declared a 6.4% dividend rate.

The EPF would pay out RM44bil in dividend for conventional savings and another RM3.98bil for shariah savings.

This would represent an almost 30% increase in payout compared to 2016.

Samsudin pointed out that the EPF, as a retirement fund, had always sought to enhance the value of its members’ savings, as seen in the declared dividend rates against Malaysia’s inflation rate.

“For 2017, the dividend rates declared for shariah savings and conventional savings were 2.61% and 3.11% respectively over the inflation rate of 3.79%.”

“For the past three years, the EPF has declared a rolling three-year real dividend of 3.51% and 3.67% respectively, which exceeded our strategic target of 2% real dividend,” he added.

Samsudin said there would always be a deviation in shariah savings returns from conventional savings in the short term.

However, the returns are expected to be similar over the long term as both share the same investment objectives and strategies.

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He also explained that the dividend payout for each account was derived from total gross realised income for the year after deducting the net impairment on financial assets, unrealised losses due to foreign exchange rate and derivative prices, investment expenses, operating expenditures, statutory charges as well as dividend on withdrawals.

According to Samsudin, gross investment income for 2017 was about RM53bil, which is the highest since EPF was set up in 1951.

Of the amount, a total of RM4.6bil was attributed to shariah savings, proportionate to its share of total shariah assets while RM48.54bil was attributed to conventional savings.

The returns for conventional savings were enhanced by the income generated from non-shariah investments following the outperformance of global banking stocks, while shariah savings do not include conventional banking stocks due to their non-shariah compliant status.

“In addition, equity impairments from shariah-compliant stocks, particularly the oil and gas, and telecommunication counters, lowered the income of the EPF’s shariah portfolio,” he said.

As of Dec 31 last year, total members’ savings amounted to RM768.51bil, of which RM67.76bil was under shariah savings and RM700.75bil under conventional savings.

“This is a challenge that goes into managing a large fund like the EPF as we need to generate consistent and sustainable returns for the long run.

“This is partly the reason why we need to diversify into overseas markets as the increase in global asset value helps us realise sizeable gains from different markets and asset classes, which contributed to the overall performance.”

The RM53.14bil in 2017 gross investment income increased 14.13% from RM46.56bil in 2016, he said.

The amount has been growing annually at 11.9% since 2007, and is equivalent to a gross return on investment of 7.3%, said Samsudin.