The Employees Provident Fund (EPF) in Malaysia – with the approval of the Minister of Finance – has declared on 10 February a dividend rate of 6.90% for Simpanan Konvensional 2017, with payout amounting to RM44.15 billion; along with 6.40% for Simpanan Shariah 2017, with payout amounting to RM3.98 billion. In total, the payout for 2017 amounts to RM48.13 billion – an increase of 29.8% from 2016.
Tan Sri Samsudin Osman, chairman of EPF, said: “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.”
“Simpanan Shariah has shown a strong performance considering that this is its first dividend declaration. This reaffirms the strength and health of EPF’s shariah asset and should come as good news to our members who have switched to Simpanan Shariah. As for Simpanan Konvensional, the 6.90% was the highest rate ever announced since 1997,” he said.
According to the release, 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.
Simpanan Shariah derived its income solely from its portion of Shariah assets while for Simpanan Konvensional, a total of 38% of the income was generated by its share of Shariah assets and 62% from non-Shariah assets.
Gross investment income for 2017 was RM53.14 billion, the highest since the EPF’s establishment in 1951. Of the amount, a total of RM4.60 billion was attributed to Simpanan Shariah, proportionate to its share of total Shariah assets while RM48.54 billion was attributed to Simpanan Konvensional.
The returns for Simpanan Konvensional were enhanced by the income generated from non-Shariah investments following the outperformance of global banking stocks, while Simpanan Shariah does 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.
Tan Sri Samsudin said: “There will always be a deviation in Simpanan Shariah returns from Simpanan Konvensional 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.”
“As a retirement fund, our objective is to preserve and enhance the value of our members’ retirement savings and this can be measured by looking at our declared dividend rates against Malaysia’s inflation rate,” he continued.
On the RM48.13 billion dividend 2017 payout, Tan Sri Samsudin said the amount needed to pay 1% dividend was RM7.02 billion, in tandem with the annualised growth of members’ savings of 10.98% since 1990. As at 31 December 2017, total members savings amounted to RM768.51 billion, of which RM67.76 billion was under Simpanan Shariah and RM700.75 billion under Simpanan Konvensional.
“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,” said Tan Sri Samsudin.
The RM53.14 billion in 2017 gross investment income increased 14.13% from RM46.56 billion in 2016. The amount has been growing annually at 11.90% since 2007, and is equivalent to a gross return on investment (ROI) of 7.30%
Tan Sri Samsudin said the EPF’s investments had been delivering a three-year annualised ROI of 7.30%, which was commendable given the EPF’s nature as a balanced fund with exposure in fixed income instruments of about 50%
“On that note, I would like to congratulate the EPF team for this outstanding performance to ensure that our assets grow at healthy levels in line with EPF’s vision to help members achieve a better future and their savings and interest are continuously safeguarded,” he concluded.
Photo / 123RF