[KUALA LUMPUR] MALAYSIA’S Employees Provident Fund (EPF), the pension fund for more than 16 million members, declared on Saturday (Mar 1) a 6.3 per cent dividend for both its conventional and syariah savings accounts for 2024.
This marks the fund’s highest payout since 2017, and the first time that both accounts have the same rate. The higher-than-expected return has surprised economists, with many anticipating it could spur more voluntary contributions.
The move sees EPF distributing RM73.2 billion (S$22.2 billion) in total, a sharp rise from 2023’s 5.5 per cent and 5.4 per cent rates for conventional and syariah accounts, respectively.
In 2017, the pension fund declared a 6.9 per cent dividend for the conventional savings, and 6.4 per cent for the syariah savings.
Traditionally, syariah savings account members receive a lower dividend rate compared with conventional savings account members.
Incentivising savings
Bank Muamalat chief economist Mohd Afzanizam Abdul Rashid said the 6.3 per cent dividend far exceeds Malaysia’s long-term inflation rate of 2.5 per cent a year. This will help EPF members’ savings grow at a healthy pace, he added.
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While EPF introduced “Account 3” as a flexible withdrawal option, only 30 per cent of members aged under 55 have made the move.
“This suggests most members prefer to keep their savings with EPF, despite having the option to withdraw,” he noted, pointing to rising awareness of retirement security.
Currently, EPF has more than 16 million members. More than half, or about 8.8 million, are active – representing 51 per cent of Malaysia’s 17.3 million-strong labour force. The active-to-inactive member ratio improved in 2024 to 54:46.
Total contributions in 2024 rose 11 per cent to RM108.2 billion, reflecting the higher number of members and wage growth. New employer registrations came in at 71,471, taking the total number of registered employers to 614,563.
Dr Geoffrey Williams, the founder and director of Williams Business Consultancy, said that the strong dividend could encourage more voluntary contributions, given EPF’s risk-free returns. However, he cautioned that only members with substantial savings benefit from the high dividend.
“Millions of members have depleted their savings due to past withdrawals,” he noted.
He suggested creating a “Malaysia Superfund” – similar in size to the EPF – by consolidating underperforming government-linked investment companies.
This, he noted, could help address Malaysia’s pension crisis by solving the civil service pensions problem and potentially providing a universal basic pension.
“The high dividends show that past investment challenges have not affected this year’s performance. While the EPF should always be scrutinised, it also deserves credit for adapting its strategy to market conditions,” he added.
EPF has been facing scrutiny over its handling of Malaysia Airports Holdings (MAHB) shares, with lawmakers questioning alleged losses of RM700 million from selling shares at RM6.80 apiece, before buying them back for RM11 in a privatisation deal.
Lawmakers summoned EPF executives on Feb 17 to explain the transaction that led to the delisting of MAHB on Feb 25, and brought in BlackRock’s Global Infrastructure Partners.
Foreign investments outshine
During EPF’s financial results briefing on Saturday, EPF chairman Mohd Zuki Ali attributed the improved returns to recovering global and domestic markets, resilient economic growth and sound portfolio management.
The fund closed 2024 with a double-digit or 11 per cent increase in investment income to nearly RM74.5 billion, driven by stronger portfolio performance and higher member contributions.
Investment assets rose 10 per cent from a year ago to RM1.25 trillion in 2024, driven by higher portfolio income and net contributions.
Foreign investments, which make up just over a third of EPF’s total assets under management, punched above their weight by contributing half of its total returns. Meanwhile, domestic investments – though forming the bulk or 63 per cent of the portfolio – delivered a nearly equal share of income.
Despite foreign investment yielding higher returns, EPF chief executive officer Ahmad Zulqarnain Onn said the fund will continue prioritising domestic investments, allocating around 70 to 80 per cent of new funds to local assets.
This strategy aligns with EPF’s Strategic Asset Allocation plan for 2025 to 2027, which was approved by its investment panel and Malaysia’s Ministry of Finance.
In 2024, the EPF deployed RM96.8 billion in new investments, with 82 per cent directed to domestic assets and 18 per cent to overseas markets.
Asset class performance
Equities remained EPF’s biggest income driver, contributing RM49.8 billion – around two-thirds of total returns – as fund managers capitalised on market volatility, said Ahmad Zulqarnain. The gains surpassed the previous year’s performance, reflecting a stronger showing in 2024.
Fixed income investments contributed RM21.9 billion or 29.4 per cent of the total income for 2024, while real estate and infrastructure investments added RM1.6 billion. Money market instruments contributed RM1.1 billion.
Zuki cautioned that geopolitical tensions, trade barriers, climate risks, inflation and technological disruptions pose major challenges for global markets.
He noted that shifting trade patterns and the retreat from multilateralism could weigh on economic growth and influence central bank policies.
Despite these headwinds, he expects Malaysia’s economy to stay resilient, driven by strong domestic demand, investment growth and steady exports.
