Malaysia's employee savings fund declares 4.5% dividend

by Lazylizards | March 17, 2009 at 03:35 am

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If returns from investments made in 2008 are used as a measure of how successful investment funds are, then Malaysia's Employee Provident Fund or EPF will arguably be one of the world's most successful.

At 4.5%, the declared dividend is lower than the previous year's 5.8%. But compared to the huge losses experienced by similar funds in many rich countries, the members of such funds will think that is an extraordinary feat.

Consider the following numbers: (dividend rates from 1983 to 2006)

1983 to 1987 1988 to 1994 1995 1996 1997 to 1998 1999 2000 2001 2002 2003 2004 2005 2006

8.5%	8.0%	7.5%	7.7%	6.7%	6.84%	6.00%	5.00%	4.25%	4.50%	4.75%	5.00%	5.15%

The EPF functions by requiring 11% of a member's monthly salary to be saved, while the member's employer contributes another 12%. Reportedly, 75% of the funds are invested in Malaysian Government Securities, loans and bonds, and money market instruments

However, despite the financial meltdown, EPF recorded its highest ever earnings of RM20bil in gross income last year, up 9.36% from the RM18.29bil recorded previously.

“While last year was challenging due to the unprecedented global financial crisis that has impacted economies worldwide, EPF’s investment portfolio for the year performed better at the gross income level compared to 2007.

“But due to the sharp decline in the equity markets, a large provision has to be made, resulting in marked reduction in net income,” said its chairman Tan Sri Samsudin Osman.