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KUALA LUMPUR (Feb. 27): Members who save their retirement fund with the Employee Provident Fund (EPF) should have a say if there is a change in the current way the benefits are paid. dividends annually to a tiered structure, said its outgoing CEO, Tunku Alizakri Alias. .
“The tiered dividend is a very complex structure, it has both advantages and disadvantages. We [the EPF] I have always operated from a basic philosophy of ‘everyone gets the same dividend’. The tiered dividend would actually suggest that there will be ways that we can go and deliver our dividends to our members in very different ways in the future, so again this is a very complex issue and this is something the EPF will have to do. resolve and contact our members at the end of the day because our members must have a say in how the dividends they will receive in the future should be structured, ”Alizakri told reporters at a virtual press conference this afternoon after announcing the EPF. 2020 dividend of 5.2% (conventional) and 4.9% (shariah).
Alizakri, whose public duties as EPF CEO end today, said in response to the question of whether EPF is considering tiered dividends to help give members with less savings an advantage.
Staggered dividends, in short, pay a higher effective dividend rate to those with lower total savings and a lower rate when savings grow above a certain predetermined threshold. For example, each EPF member may be paid a higher dividend rate for the first savings of RM50,000, but receive a progressively lower dividend rate for the subsequent RM50,000 or RM100,000. The rationale is similar to progressive tax, where those with higher taxable income would fall into a higher tax bracket and pay more taxes.
The edgeExtrapolation of the 2018 data from the EPF of 7.36 million active members with a saving of 612.37 billion ringgit at the end of 2018 shows that it is possible to pay a dividend of 7.1% to 7.36 million members for savings of up to RM50,000, benefiting 4.35 million active members with less than RM50,000 saved at most. This is because a lower dividend rate will be paid to the next level of savings, the minimum being 2.5% minimum for savings greater than RM1 million. In other words, even the member with more than RM1 million in savings will get a 7.1% dividend for the first RM50,000 saved, but get the lowest rate of 2.5% for savings over RM1 million.
Regardless of whether the dividend structure changes in the future or not, Alizakri assures members that the EPF is still the best option when it comes to such a retirement fund: “I would like to assure you once again that no No matter how the dividend structure will be in the future, whether individual or tiered, your savings will always be managed in [the] in the best possible way by the best possible investment team I would like to think that you will also get the best returns for the type of fund you will be placing your retirement fund in, so rest assured that EPF is still the place for your future retirement “.
In his presentation to the media, Alizakri said that an EPF member who saved RM1,000 with the EPF 30 years ago would have seen the money triple to RM3,040 by the end of 2020, based on the stellar dividend the EPF had been able to get. generate the last three decades.
That same RM1,000 invested over 30 years ago would have been worth just RM977 today if the EPF had only delivered the minimum nominal dividend of 2.5% per annum over the past three decades. If an EPF member had chosen to keep RM1,000 under the mattress rather than with the EPF, those RM1,000 would have been worth only RM445 after taking inflation into account, Alizakri said.
Tenaga Nasional Bhd’s outgoing Chairman and CEO Datuk Seri Amir Hamzah Azizan will take over as CEO of EPF effective Monday (March 1, 2021).
Read also:
The State of the Nation: Tiered Dividend Needed to Help Low Income EPF Members
Mixed response to whether EPF should implement tiered dividends
EPF declares a dividend of 5.2% for the 2020 pandemic, just below the 5.45% for 2019
EPF assets reached RM 1.02 trillion but 30% may have zero balance in Account 1, 60% for Account 2
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