Unverified claims about EPF dividends will hurt only ourselves

 

Malaysians are a difficult lot to please, I guess. It seems to take a lot to make them happy. Many also get upset at the slightest provocation, even by claims that are fake or not accurate.

The EPF’s dividends for 2023 is a case in point. The fund declared a dividend of 5.5% for conventional savings and 5.4% for shariah savings.

Many leading economists in the country went on record to sing praises saying the performance of the retirement fund was commendable despite facing a difficult economic landscape both locally and abroad.

Among them was Geoffrey Williams, who has the habit of calling a spade a spade even if it upsets the government.

In private conversations with contributors, many said the dividend was not only acceptable, but it was beyond their expectations, compared to fixed deposit rates at commercial banks which are way below what EPF gives out.

To my surprise, there were many online who questioned the rate as being not a fair deal compared to the EPF’s profits. Some also questioned why the payout was so high for shariah accounts when the returns were only about 15% of EPF’s total profits.

But what could be considered as unfair attacks are viral messages from many unnamed sources making inaccurate claims on alleged bailout of a government-linked company using EPF funds.

One such message even claimed wrongly that Amanah Saham Bhd had paid a dividend of 7.5%. If the originator of the message had cared to check, ASB declared 5.25% for 2023, and paid only 4.6% to 5.5% between 2019 and 2022.

The rates were all below what EPF had paid out in the corresponding periods.

Look at Singapore, where for decades the Central Provident Fund’s annual dividend has never gone higher than 4%.

To EPF’s credit, its annual rates over the past 40 years have been between 4.25% to 8.5%. Many consider this as commendable especially when the EPF Act allows it to declare a minimum of 2.5%.

This speaks volumes of how the fund has been run competently since it was formed.

Most of the viral messages do not carry the author’s name, hence throwing their credibility down the drain. The authors should realise that such unverified claims will affect the confidence of investors and contributors. This is totally unfair as most Malaysians have only the EPF as their retirement nest.

Racial twist

As usual, some arguments took a racial twist with an anonymous post at the blog Finance Twitter claiming that the 5.4% dividend for shariah accounts, which are mainly those of Muslim contributors, had been subsidised from the income from conventional accounts which mainly comprised non-Muslims.

It said the increase of 0.65% was a big jump from the 4.75% in 2022.

The writer suspected that the dividends had been manipulated to create a favourable impression of Prime Minister Anwar Ibrahim, who had been desperately trying to win over the Malay-Muslim vote bank, by showing that shariah savings could suddenly generate extraordinary dividends at the expense of conventional savings.

The blog alleged that the gap between the two dividend rates had been big previously because shariah compliance stocks do not generate high dividends. On paper, from a layman’s point of view, this argument seems to have a basis but no one is sure how the calculations are done, in investment and accounting terms.

Perhaps the EPF should be upfront and explain what these critics term as a major discrepancy. It may help to educate contributors who are confused.

Malaysians must understand that EPF is the country’s most important investment fund; if it collapses, the entire economy will take a beating that will take a very long time to recover.

Investors are watching its management and performance as employers are major contributors to the fund.

Pension or retirement funds must be prudently invested as they are for the long-term. They are not savings to be used as soon as they grow.

Its investment principles are aimed for a fairly comfortable retirement, so it is not right to compare it with the government’s investment arm Permodalan Nasional Bhd which manages the ASB investments.

PNB is a growth fund that operates like a unit trust scheme with most of its investments placed in the stock market. The EPF on the other hand invests in stable assets locally and abroad with strict protocols to observe.

EPF only uses realised gain or income that is actually earned and received in cash for dividend payouts. It cannot use unrealised returns which are private equity where it has to revalue the assets in accordance with accounting standards.

As one economist said, many must have thought these are real gains and thus a higher dividend should have been declared.

Joining in the bandwagon blindly with unverified claims about key institutions like the EPF is tantamount to hurting ourselves.

Remember, millions of Malaysians depend on the EPF for their long-term survival. Let’s fight to keep EPF strong and accountable, not weaken it through unfounded allegations. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.