An analysis of the EPF’s past results, present investments, dividends, and projected growth since its founding in 1952. Simpanan Shariah returns, this time with EPF support.
How did EPF perform in 2019
- RM7.65b for Conventional and RM828m for Simpanan Shariah are expected to pay out every 1% dividend rate in 2019.
- adjusting for inflation, Conventional’s three-year average dividend yield is 4.33 percent (2.33 percent above 3 year rolling target of 2.00 percent ).
- The dividend purification rate for 2019 is 71% of total dividends for Muslims who have not moved to Simpanan Shariah.
How did EPF perform in 2018?
EPF has a difficult challenge ahead of it in terms of generating returns. RM7.72b was required for every 1% dividend rate in 2018 (2017: RM7.02b; 2016: RM6.50b). An increase of three times in the past decade. As projected, the overall performance of the market in 2018 was lower than in 2017. All stock market indices ended 2018 lower, including the FBMKLCI (-6%) and global equity indices (-9%) that ranged from 9% to 16%.
How did EPF perform in 2017
- Global banking equities outperformed EPF Shariah, while oil and gas and telecommunications counters had EPF Shariah impairments.
- There will be short-term differences in returns between EPF conventional and shariah funds, but long-term similarities should prevail as well.
How are EPF Dividends Calculated?
Net income and the total of the one percent dividend at the end of the year must be taken into account when determining the dividend rate.
Opening 12-month dividend-earning contribution balance (after withdrawal) and
Pro-rated dividends, i.e. dividends paid for an nth of a month, will be paid out for the remaining nth of a month. A three-month dividend, for example, will be received from the September contribution (n=9).
- You will receive a percentage of your contributions for the current year based on the number of months in which you have worked. For instance:
- If you withdraw your whole EPF balance, you will receive a 2.5% rebate. After the next EPF returns announcement, the remaining returns (if any) will be distributed.
How much is EPF dividend 2020?
KUALA LUMPUR, Malaysia (Feb. 27): A 5.2 percent dividend for conventional savings and a 4.9 percent payout for shariah saving were announced by the Employees Provident Fund (EPF) in 2020.
Traditional savings (RM42.88 billion) and shariah savings (RM4.76 billion) totaled RM47.64 billion (RM45.82 billion in 2019).
EPF’s 2020 dividends were slightly below the 5.45% (conventional) and 5% (shariah) given for 2019, but the EPF’s payout topped the 4.25 sen per unit income distribution by Permodalan Nasional Bhd’s Amanah Saham Bumiputera (ASB) for 2020 — the latter’s lowest-ever yearly return. RM7.6 billion will be distributed by ASB in 2020, which includes a bonus of 0.75 sen for the first 30,000 units to commemorate ASB’s 30th anniversary. In 2019, ASB gave out five sen each unit, plus a 0.5 sen bonus, to its customers.
For 2020, The Edge predicted that the EPF will pay out a dividend of between 4.9% and 5.5%, based on the fund’s performance in the first nine months of the year. Edge also stated that the EPF might pay at least 4.1 percent dividends if it didn’t make any money in the final quarter of 2020.
The Edge predicted that the EPF will need to pay RM9.2 billion in dividends in 2020, up from RM8.5 billion in 2019.
A 7.9 percent increase in the EPF’s total investment assets resulted in a market value of RM1.02 trillion last year.
Covid-19’s epidemic and the twin health and economic catastrophes that plagued the world in 2020 have not dampened EPF’s ability to deliver solid results, according to a statement released this morning.
Tan Sri Ahmad Badri Mohd Zahir, chairman of the EPF, said in a statement that the pension fund was able to protect the retirement funds of its members while also satisfying their urgent requirements in order to deal with the current difficulties.
Ahmad Badri said the EPF had to walk a tightrope in order to keep its members afloat during difficult times while balancing their long-term goals..
“Managing the rapid spread of Covid-19 and its ability to be transmitted made it a Black Swan event for many. However, we were proactive in dealing with the epidemic and it allowed us to overcome the difficulties. We were able to help our members more quickly and easily because to our focus on digitalization, while also ensuring that we remained relevant to members who are more tech-savvy.
“EPF’s ability to quickly modify its investment strategy and processes guaranteed that we could produce optimal performance, and we further exploited the capabilities of our around 250 investment experts who meticulously managed the portfolios and took proactive actions. In order to adjust to the new work practices, “solid cooperation and digital infrastructure were essential,” he stated.
Despite decreased net contributions in 2020, the EPF’s ability to adapt guaranteed that its investments were able to generate long-term sustainable returns under the new normal, the EPF said in a statement released today.
Simpanan Shariah received RM6.15 billion of the fund’s overall investment income, according to the EPF.
“In spite of the unexpected crisis, the EPF’s conservative approach guided by the fund’s overarching strategic asset allocation has kept the EPF afloat.’ Fixed income instruments accounted for 46% of total investments, while equity investments accounted for 42%.
“According to the EPF, real estate and infrastructure, as well as money market instruments, comprised 5% and 7% of the total.
“As a result of the Covid-19 epidemic and global concerns such as the US Presidential election in November 2020, the ongoing US-China trade war and Brexit’s impact, the EPF rebalanced its investment portfolios,” it stated.
In December 2020, the EPF expects to have invested 33 percent of its total assets outside of Malaysia in all asset classes, according to a statement released today.
A total income of RM28.71 billion was generated from investments in equities, notably international equities, as well as a consistent income distribution from the private equity portfolio.
“EPF made use of the first-quarter market declines to rebalance its holdings by purchasing shares in financially sound companies at bargain rates.
“After a slow start to the year, the EPF’s investment portfolios recovered strongly in the second half of the year as a result of improved global and domestic market conditions.
“For long-term investment portfolios, the EPF decided to write down RM7.71 billion of its listed equities portfolio,” the EPF said in a statement.
According to Ahmad Badri, the EPF is a long-term investor and will continue to diversify across asset classes, strategies, managers, markets, nations and currencies in order to achieve its investment objectives.
According to him, the EPF’s performance relied heavily on contributions from offshore assets.
Ahmad Badri said the Covid-19 vaccine deployment in 2021 will have a significant impact on the year’s projection, as the EPF is aware of new strains of Covid-19 that are easily disseminated.
“However, we are certain that the issue is under control, with governments throughout the world ensuring that vaccines reach people as quickly as possible, while in Malaysia, the first shipment of vaccines has arrived and will be delivered to the population shortly.
“A pension fund that has been around for 70 years and is one of the oldest in the world will continue to focus on its mission of helping members save enough money for a secure retirement. To facilitate the purchase of Takaful and insurance products, a new withdrawal system, outlined in Budget 2021, will be implemented by the end of the year, he added.
30 percent of the RM1.02 trillion in EPF assets may have a zero balance in Account 1, and 60 percent may have a balance of zero in Account 2.
What is EPF dividend?
Net investment income of RM33.8 billion for the first half of 2021 was 61.3 percent larger than the RM20.96 billion in the first half of 2020; RM0.26 billion of this was written down in 1H2021 compared to the RM9.16 billion in 1H2020, of which RM7.5 million was written down in 1Q2020.
The EPF handed out RM47.64 billion in dividends in 2020 (RM42.88 billion for Conventional Savings and RM4.76 billion for Shariah Savings), therefore the first-half performance is impressive.
In 2020, the EPF paid a dividend of 1% of its total fund size, which is nearly the same amount it paid in 2021. If this dividend payment level maintains roughly the same in 2021, the EPF only has to earn an additional RM14 million in net investment income to match the dividend it paid in 2020. In light of its historical performance, it should not be difficult to beat last year’s dividend payout.
If the EPF is able to generate at least RM11 billion in net investment income per quarter in the second half of the year, our back-of-the-envelope calculation reveals that the dividend for 2021 might approach 6% or close to it. It would be unrealistic to expect an even greater dividend if the RM33.8 billion in net investment income for 1H2021 were to be annualized, given the difficulty of repeating this success in 1Q2021.
That’s what Amir told The Edge back in June “This year’s threshold is likely to be similar to last year’s. As a result of “By 2021, if the EPF had followed a “normal” growth trajectory, the amount the EPF would have paid out in dividends would have increased to close to 10% of the EPF’s total assets, according to The Edge’s projections.
That means the EPF will need to pay a 5% payout in 2021, and a 6% dividend in 2022, closer to RM55.2 billion (rather than RM60 billion). With a dividend of 6.9 percent for conventional savings and 6.4 percent for Shariah savings, the EPF paid out RM48.13 billion in dividends in 2017. The money needed to pay 1% dividend was less than seven billion Malaysian dollars.
What is EPF annual dividend rate?
Interest on the Employee Retirement Income Security Act (ERISA) In return for all your payments, the government promises that Simpanan Konvensional will pay you a minimum dividend rate of 2.50 percent.
Is EPF taxable Malaysia?
Contributions to the Employees’ Provident Fund (EPF) are tax deductible up to a maximum of RM4,000, subject to government modifications (excluding of exemption for life insurance premium). You do not have to pay income tax on any money you withdraw from your EPF funds. As a result, the EPF investment returns are tax-free.
Is EPF and Kwsp same?
KWSP, or Kumpulan Wang Simpanan Pekerja in Malaysia, stands for Employees Provident Fund and is commonly known as EPF.
KWSP requires that every company contribute EPF for its employees/workers by the 15th day of each month, and must remit the contribution sum to KWSP by that date. KWSP will impose a late penalty if the submission deadline is missed.
The government encourages companies to contribute more than the statutory requirement of 12 to 13 percent for their employees in order to receive a tax benefit for such additional contributions by the company.
If an employer contributes 19 percent of an employee’s salary, the contribution is deductible.
How much EPF is deducted from salary?
Investing in an EPF is a long-term strategy for securing one’s future financial well being. Companies with more than 20 employees have the option of deducting EPF contributions. Employees contribute 16% of their base income to the Employees’ Pension Fund, while the employer contributes 8.33% to the EPF and 3.67% to the EPF of the employees.
The Employee Provident Fund Organization collects the combined contributions of employees and employers and places them in a trust account. At the end of the fiscal year, an interest payment is made based on the fund’s monthly operating balance. To avoid the EPF deduction, employees earning more than Rs 15,000 a year must make a declaration on EPFO Form 11 indicating their desire to do so.
Every year, the EPFO sets the interest rate for EPF funds. The central government’s Finance Ministry determines the interest rate based on current market conditions. For the financial year 2020-21, the EPF interest rate is set at 8.5 percent p.a., which is unchanged from the interest rate for the previous year.
What is the EPF interest rate in Malaysia?
EPF’s highest dividend rate in the recent decade was 6.9 percent in 2017, followed by 6.75 percent in 2014. There were good market conditions in both years, resulting in better investment returns than predicted for the EPF. Gross investment income for 2017 was around RM53.14 billion, which was the largest since EPF was created in 1951, according to the EPF Chairman.
However, the dividend rate of the EPF is continually affected by market volatility. There were many turbulences in 2016, including Brexit, the US Presidential election, slower global development in key economies and a decline of crude oil prices that made it difficult for the EPF to invest.
Members now have the option of having their money handled and invested according to syariah principles, thanks to the introduction of Syariah savings on August 8th, 2016. This isn’t a surprise, given Malaysia’s expanding significance in the global Islamic financial sector.. Syariah-compliant dividend payments would be paid to EPF members who chose to save in the syariah-compliant portfolio.
During 2020, the EPF dividend rate for conventional savings was 5.2 percent, while the dividend rate for syariah savings was 4.9 percent. Since 2008, the conventional fund’s interest rate has been the lowest. Despite this, the Covid-19 pandemic’s impact on the world economy in 2020 was regarded to be better than projected.
As a result of the diligent management of the fund’s investments, the EPF generated its highest-ever gross investment income in 2020 of RM60.98 billion. When the stocks market crashed in March 2020 and the global stock markets recovered, the EPF’s investment portfolios reaped considerable returns.
After careful consideration of how global financial markets may be affected by the pandemic and other international procedures, the provident fund took steps to reorganize its investment portfolio. Among them were the upcoming November 2020 US presidential election, as well as the ongoing US-China trade war and the ongoing Brexit negotiations.
How EPF Dividends Are Calculated
The Minister of Finance must first approve the EPF management’s recommended final dividend rate before it can be brought to the EPF Board for consideration. EPF’s dividend rate for the current year can be declared if the Board of Trustees agrees.
The EPF website explains that the final dividend rate is calculated using the following formula:
Dividend-earning contributions made over a 12-month period, including any withdrawals
Regular monthly contributions that are eligible for pro-rated dividends (dividends for n months) receive dividends for a period of twelve months. It is possible to receive a three-month dividend for the September contribution (n=9).
Section 27 of the EPF Act of 1991 stipulates a minimum annual dividend rate of 2.5% for members’ savings as a minimum. Because of this, members will always get the minimal dividend rate.
Is EPF Enough For Retirement?
EPF funds may not be adequate for Malaysians in retirement, according to an increasing number of citizens. This is due in part to the fact that EPF savings can be used for certain big-ticket items, low EPF investment returns, and the poor spending habits of those who withdraw their funds when they reach the age of eligibility.
It is true that the EPF is a critical retirement savings program for Malaysians – but they should not rely on it exclusively. There are a variety of financial products that can help people save for retirement, such as Private Retirement Schemes (PRS), unit trusts, and even investment-linked life insurance plans.
However, if you start saving early and let the magic of compounding interest aid you along the way, all of this may be achieved.
How can I keep 11% in EPF?
EPF announced on November 28th, 2020 that the employee’s statutory contribution rate would be lowered from 11% to just nine percent (9%) going forward.
Members can use the Borang KWSP 17A (Khas 2021) form to keep the employee contribution rate at 11%.
Online registration through i-Akaun must then be completed by each employee (Employer).
The online registration via i-Akaun (Employer) for Borang KWSP 17A (Khas 2021) form is now open for submission.
In order to retain the 11% EPF contribution rate for employees, employers can begin submitting their employees’ applications through i-Akaun (Employer) as of right now, even though KWSP has not specified a precise date.
There are, however, many HR netizens who are dissatisfied with the application process, which they find tiresome and some even had technical difficulties when submitting the form via i-Akaun.
“What is the point of submitting an application if you want to keep your EPF rate at 11%? Please help me out with this #hellokennotunderstand “A Facebook user stated this.
KWSP was also criticized for forcing employees to submit an application form with a physical signature.
The good news is that as long as employees inform their employers by email, whatsapp, sms, and etc., the signature of an employee is no longer required.
The application form submission to retain 11% is indeed troublesome and tedious but we still need to follow KWSP procedures. Fret not, KWSP has put up a straightforward guide to help employers navigate their form submission at ease.
2nd Step: Select VE (VOLUNTARY EXCESS) from the portal’s left-hand menu.
Step 3: Select csv.file and click on “upload file” (to convert excel to csv.file, kindly refer to this quick EPF guide here)
Submit in the portal with the filename “VEKHAS2021” as the file name.
Step 5: Return to the VE home page to see if your application has been approved or denied.
If you’re experiencing any of the following issues while submitting a file, here are some helpful hints:
- If your EPF number is too long, add a zero before it: ‘0xxxxxxxx’
- Right-click and erase the rows containing the EPF number, name, or MyKad.
