KUALA LUMPUR (March 2): The main takeaway from the Employees Provident Fund's (EPF) 2021 performance briefing was this: EPF is reverting to its mandate of helping contributors build their retirement savings following massive withdrawals to cope with the fallout of Covid-19.
Indeed the estimated RM110 billion withdrawn by contributors in 2020 and 2021 using various Covid-19 measures related to the fund resulted in EPF recording its first ever negative net contribution in 20 years of RM58.2 billion. Moreover, RM22 billion worth of foreign investments had to be repatriated back to Malaysia over 2020-2021 to help with liquidity strain from the humongous withdrawals even though some of the investments had yet to reach maturity.
Emergency withdrawals and a lower mandatory contribution rate since the pandemic have "set back 10 years" worth of savings among its members, said the fund's chief executive officer Datuk Seri Amir Hamzah.
At the EPF 2021 performance briefing, Amir pointed out that 27% of active EPF contributors have basic savings (of RM240,000), but that benchmark was already reached in 2012.
"Now the role of EPF is really to focus on rebuilding [the members' savings]," Amir said.
In total, EPF estimated an impact of RM110 billion from the fund's Covid-19-related measures, namely i-Lestari (RM20.8 billion), i-Sinar (RM58.7 billion), i-Citra (RM21.4 billion) and RM9 billion savings losses from employees who had opted to have their monthly contributions reduced from a set 11% contribution.
The emergency measures resulted in 6.1 million or around half of EPF members having less than RM10,000 in their accounts — a considerable jump of 28% from 4.7 million members as of April 2020.
Furthermore, 2.6 million members now have less than RM1,000 in EPF savings — a drastic 86% increase from 1.4 million as of April 2020.
The retirement fund, which played a key role in providing support measures to its contributors during the pandemic, hopes an end will be put to emergency withdrawals as domestically almost all economic activities have been allowed to resume. The last of the emergency withdrawals, i-Citra, ended last month (February 2022).
Moving forward, Amir called for the public to subscribe to voluntary additional contribution capped at RM60,000 per year, or a voluntary increase in monthly contribution rate above the compulsory 11% to speed up replenishment of funds.
RM58b net withdrawals in 2021
Although Amir said EPF was not impacted by the withdrawals apart from its liquidity, the fund recorded its first ever negative net contribution in 20 years of RM58.2 billion in 2021.
EPF also saw the repatriation of RM22 billion worth of foreign investments over the two years to help with liquidity strain from the withdrawals.
"We had to take cognisance of the fact that we did not want to rattle the local market [instead].
"Some of the investments, I must admit, were not at the stage of maturity, but we needed the liquidity," he said.
Despite the net withdrawals, the fund declared a dividend of 6.1% for conventional savings, and 5.65% for shariah savings — both higher than 2019 levels.
In 2021, EPF investment assets grew 0.8% to RM1.008 trillion, from RM1 trillion in 2020.
Asset allocation was led by fixed income instruments (45%), followed by equities (44%), money market instruments (5%), and real estate and infrastructure (6%).
From RM63.45 billion in 2020, gross investment income rose 5.69% year-on-year to RM67.06 billion comprising income from equities (58.05%), fixed income instruments (29.08%), real estate and infrastructure (11.47%), and money market instruments (1.4%).