Malaysia’s Largest Pension Returns 14.13% in 2017

Employees Provident Fund also declares highest dividend in 20 years.

Malaysia’s RM800 billion ($203.33 billion) Employees Provident Fund (EPF) gained RM53.14 billion in gross investment income in 2017, a 14.13% increase  from the RM46.56 billion reported the previous year. It has been growing annually at 11.9% since 2007. 

The EPF also declared a total dividend payout of RM48.13 billion, or $12.24 billion for 2017, a 30% increase from the previous year’s payout. The fund declared a 6.9% dividend for its Simpanan Konvensional account, which is equal to RM44.15 billion, and 6.40% for its Simpanan Shariah account, or RM3.98 billion.

“Simpanan Shariah has shown a strong performance considering that this is its first dividend declaration,” said EPF Chairman Tan Sri Samsudin Osman in a release. “This reaffirms the strength and health of EPF’s shariah asset and should come as good news to our members who have switched to Simpanan Shariah. As for Simpanan Konvensional, the 6.90% was the highest rate ever announced since 1997.”

The fund said the dividends were calculated from total gross realized income for the year, after deducting the net impairment on financial assets, unrealized losses due to foreign exchange rate and derivative prices; investment expenses, operating expenditures, statutory charges, and dividend on withdrawals.

Gross investment income for 2017 was RM53.14 billion, the highest since the EPF was created in 1951. Simpanan Konvensional accounted for RM48.54 billion of that amount, while Simpanan Shariah was responsible for RM4.60 billion. Simpanan Shariah derived its income exclusively from its portion of Shariah assets, while Simpanan Konvensional generated 62% of its income from non-Shariah assets, and 38% from its Shariah assets.

EPF said the returns for Simpanan Konvensional were enhanced by the income generated from non-Shariah investments following the outperformance of global banking stocks, while Simpanan Shariah does not include conventional banking stocks due to their non-Shariah compliant status.

“There will always be a deviation in Simpanan Shariah returns from Simpanan Konvensional in the short-term,” said Samsudin. “However, the returns are expected to be similar over the long term as both share the same investment objectives and strategies.”

The dividend rates for Simpanan Konvensional and Simpanan Shariah were 2.61% and 3.11%, respectively, for 2017, over an inflation rate of 3.79%. For the past three years, the EPF has declared a rolling three-year real dividend of 3.51% and 3.67%, which the fund said exceeded its strategic target of 2% real dividend.

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