Despite the economic ramifications of Covid-19, the Employees Provident Fund’s (EPF) stellar performance in 2021 means it would continue to be the main savings investment option for retirement, say economists.
PETALING JAYA: Despite the economic ramifications of Covid-19, the Employees Provident Fund’s (EPF) stellar performance in 2021 means it would continue to be the main savings investment option for retirement, say economists.
EPF yesterday declared a dividend of 6.1% for the financial year 2021, an increase of 0.9% from the previous year for conventional accounts, and 4.9% for shariah accounts, an increase of 0.75%.
Sunway University Economics professor Dr Yeah Kim Leng said the good dividend rate boosts confidence for contributors to maintain their savings in their EPF accounts.
“EPF’s sustained performance will be helpful in strengthening the confidence of contributors. Widening its coverage to gig economy workers will be an important measure to provide an adequate social safety net for all Malaysians, especially the low-income groups,” he told theSun.
Yeah said EPF’s performance in 2021 further burnishes its reputation as a well-managed pension fund institution.
“Despite withdrawals of more than a hundred billion ringgit under Covid-19 stimulus packages, and the pandemic-induced economic downturn, EPF’s strong performance in 2021 that enabled a distribution of a real inflation-adjusted return of 3.6%, dividend rate minus inflation rate, will be welcomed by its sizeable pool of account holders,” he said.
“The global financial markets staged an early recovery from the world recession in 2020 due to aggressive cuts in interest rates and massive fiscal stimuli mounted by most governments.
“The global economy rebounded in 2021 and together with the accommodative fiscal and monetary policies, fuelled the performance of the global financial markets where EPF has sizeable exposure,” he added.
Universiti Utara Malaysia professor of economics Dr K. Kuperan Viswanathan said the dividend rate is good, given the economy’s negative growth in 2021.
“This rate is higher than other safe low-risk deposit rates available from other financial institutions. So, EPF is maintaining its image and position as a good performing retirement fund and will benefit the country and help to reduce the burden of retirees in the future.”
Kuperan pointed out that it was important at this juncture, when the economy is doing badly, for EPF to send good signals to contributors and encourage more savings and replenish the funds that were withdrawn over the last two years.
Third Age Media Association founding president Cheah Tuck Wing said he expects more people to continue to save their money in their EPF account as, with the announcement, EPF is showing that it is a good option in saving for retirement.
“We always encourage senior citizens to not withdraw all their money from their EPF accounts because EPF is showing that they have a stable management and government guarantee.”
Financial education should be taught to everyone as it is important to have savings for retirement, Cheah said, adding EPF policies must be balanced.
“Any decision made must ensure fair distribution of wealth to the people and policies must be consistent. The policies must also be sustainable and have a positive effect in stimulating the economy. “If more money is invested in savings, then there will be less consumption in the economy, which can be bad in the post pandemic era when the country’s economy is trying to recover,” he added.