KUALA LUMPUR (March 2): The Employees Provident Fund (EPF) declared a 6.10% dividend for conventional savings and 5.65% dividend for shariah savings for 2021 — beating the 5.45% (conventional) and 5% (shariah) declared in pre-pandemic 2019.
Total dividends declared hit a new all-time high of RM56.72 billion (RM50.45 billion conventional and RM6.27 billion shariah) despite unprecedented Covid-19-related withdrawals hitting growth in its fund size, beating the previous all-time high of RM48.13 billion in 2017. Total distributable income was RM57.1 billion (RM50.8 billion conventional and RM6.3 billion shariah), EPF’s presentation slides showed.
The Edge had in mid-January estimated that the EPF’s dividend rate would be above 2019’s 5.45% and could even exceed 6% for 2021 based on the fund’s performance in the first nine months of 2021. The Edge had also said that the EPF’s absolute dividend payout was poised to hit a new all-time high, with net investment income for the first nine months of 2021 of RM47.67 billion (RM48.02 billion gross) being already more than the RM47.64 billion dividend paid out to EPF members in 2020.
The EPF’s 2021 dividend rate is not only significantly higher than 2020’s rate of 5.2% and 4.9% but also tops the five sen per unit income distribution by Permodalan Nasional Bhd’s flagship Amanah Saham Bumiputera (ASB) for 2021.
According to the EPF, its overall investment assets grew to RM1.008 trillion in 2021, up 0.8% year-on-year from RM1 trillion in 2020. In February 2021, the EPF said its overall investment assets grew 7.9% to RM998 billion from RM924.75 billion in 2019.
The significantly slower growth in its total investment assets, despite strong investment performance, was owing to Covid-19-related withdrawals, including the unprecedented i-Sinar Account 1 withdrawals totalling RM58.7 billion. The Edge last year noted that the EPF could experience a rare net withdrawal in 2021, where the amount of funds deposited into the EPF is less than total withdrawals for the year.
In its statement, the EPF said it saw its first-ever negative net contributions (where withdrawals exceeded contributions) in 20 years of RM58.2 billion in 2021 but did not provide a breakdown of gross contributions and withdrawals for the year. At a briefing on Wednesday, EPF CEO Datuk Seri Amir Hamzah Azizan said that the fund had prematurely taken profit on some investments and brought back RM22 billion from abroad to cater to the sizeable Covid-19-related withdrawals last year.
Some 7.3 million EPF members had applied for at least one or all three of the Covid-19-related special withdrawals — i-Lestari, i-Sinar and i-Citra — that collectively saw RM100.9 billion withdrawn from the EPF between April 2020 and February 2022, EPF data show. The amount not saved with the EPF rises to RM110 billion when including the RM9 billion that was released to members because of the reduction in employees’ statutory contribution rate (from 11% to 7% from April to December 2020, and from 11% to 9% from January 2021 to June 2022).
“The RM101 billion pandemic-related withdrawals since the year 2020 had resulted in 48% of EPF members [below age 55] having less than RM10,000 in their accounts. We hope that this dividend and our continued performance will help us begin the process of rebuilding our members’ retirement savings, as economic recovery takes shape over the course of the year,” EPF chairman Tan Sri Ahmad Badri Mohd Zahir said in a statement dated March 2.
For a three-year period, real (inflation-adjusted) returns were 4.91% for its conventional portfolio and 4.51% for shariah savings — surpassing its target of beating inflation by 2% over a rolling three-year period. The EPF said dividend payout for each savings were arrived at from total gross realised investment income for the year “after deducting net impairment on financial assets, cost write down on listed equities, unrealised losses due to foreign exchange rate and derivative prices, investment expenses, operating expenses, statutory charges, as well as dividend on withdrawals”.
Total gross investment income was RM67.06 billion in 2021, up 6% from RM63.45 billion in 2020, “driven by a progressive recovery in the equities market and most asset classes amid the global rebound”.
Overseas investments, which account for 37% of its assets but contributed 56% of overall returns, “were critical contributors to its overall performance”.
The continued market recovery in 2021, particularly in developed markets, provided EPF the opportunity to realise some profits.
Equities, particularly foreign-listed equities, continued to be a key driver for returns — delivering RM38.93 billion or 58% of the EPF’s gross investment income last year. In line with the broad recovery in the equities market, the EPF said it only saw the need to write down RM1.15 billion from its listed equity portfolio in 2021, significantly lower than RM7.71 billion in 2020.
Fixed income, which made up 45% of its investment assets, contributed RM19.5 billion or 29% of the EPF’s gross investment income in 2021.
Its real estate and infrastructure portfolio, which accounted for 6% of its asset base but 12% of gross investment income, continued to be a good inflation hedge. Return on investment (ROI) for the segment was 6.53%, 184 basis points above the 4.69% ROI for its fixed-income portfolio.
Conversely, money markets, which account for 5% of investment assets and allow liquidity management, only brought in 1% of gross investment income in 2021.
Dividends for 2021 will be reflected in members’ accounts by Sunday (March 6).
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