PETALING JAYA: The Employees Provident Fund (EPF) is encouraging its members to keep their EPF account active to continue earning income after 55 until 100 from its competitive annual dividend payouts.
Sharing with Sunbiz how a normal working class Malaysian can save and grow his money with EPF, chief strategy officer Nurhisham Hussein (pix) disclosed that some of its members are still keeping a partial amount of funds in their account to keep it active after 55, in order to receive the yearly dividends.
After 55, he said members can withdraw whatever amount they want from the EPF account, just like a savings account and keep the balance so that they can continue benefiting from the annual payout dividends until they turn 100 years old.
EPF’s aim is not only to stay relevant but also create a better retirement savings for all its members.
“We continue to provide the same level of returns, regardless of what age you are and what your (employment) status is. We actually have quite a few members who continue to save actively after 60 and there’s a handful who are over 80 and still contributing,” said Nurhisham.
He said that the biggest difference between a normal savings account and an EPF account post-55, is “you earn little dividend on your savings”.
He reckoned that a fixed deposit would have a return of less than 3%, which also depends on the duration. While, a savings account would give a dividend payout of about 1% or less.
“If you keep it with EPF, you will still continue to earn 5% plus, at least that’s our track record over the last 10 years, which is an enormous factor, you continue to preserve your savings because it continues to grow.
He said that its 55 and above members’ active funds will continue to increase, despite being withdrawn on a monthly basis.
“We actually encourage that, you only take out what you need, rather than the whole thing. A lot people take out a lump sum first to pay off some of the debts, but if you want to continue to grow the savings, keep it with EPF,” he added.
On the difference between EPF and ASB, he noted that the latter has a “slightly different savings mechanism” and can be regarded as general savings which is conveniently accessible as well as it has capital-preservation, while earning dividends and bonuses.
However, he opined that ASB is entirely equity based and is highly dependent on the performance of the domestic equity market.
Nurhisham reckoned that if the domestic equity market doesn’t perform well, it will affect the returns.
He explained that EPF has shifted to a strategic asset location approach since 15 years ago to “a mixed assets type of fund”.
“Close to 50% of our investments are in fixed income. We have 40% in equities, 10% in alternative investments. We are geographically diverse, we have something like 36% of our assets overseas, where the returns have been much higher than they have been in Malaysia. So, you get the benefits of very high diversification, just by keeping your savings in EPF,” he explained.
He clarified that it is not a choice between EPF or ASB. In terms of savings strategy, he advised for individual to not put their “eggs all in one basket” and to have a holistic perspective by keeping their savings in different types of investments.
In addition, Nurhisham said that as of this year, their voluntary self-contribution has been increased to RM100,000 from RM60,000, up until the age of 75.
“We actually have a lot of interest from people over 60 years old who want to contribute and they have been after us about the RM60,000 limit. (They) said not enough,” he shared.