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Malaysia’s EPF first-half investment income jumps but frets about members’ retirement

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Malaysia’s largest pension fund reported a near 25% jump in investment income in the first half of 2021, but voiced concern about members’ retirement security, with less than 30% of older members saving the minimum sum deemed necessary to retire.

The Employees Provident Fund’s (EPF) total gross investment income in the six months through June was 34.06 billion ringgit (US$8.14 billion), up from 27.28 billion ringgit in the same period last year.

Income from equities jumped almost 54% to 22.17 billion ringgit and income from money market instruments, real estate and infrastructure nearly doubled to 2.69 billion ringgit. But bond income fell almost 17% to 9.2 billion ringgit.

EPF Chief Executive Officer Amir Hamzah Azizan describes the first-half performance as “resilient.

“The performance is driven by the progressive recovery of the equity markets amid the global rebound,” he says in a statement on September 25.

According to Amir Hamzah, the EPF is confident that the billions of dollars of government stimulus announced in the wake of the coronavirus crisis will keep business sentiment strong and boost domestic demand.

But “we are very concerned about the retirement security of our members, especially with 46% of EPF members below the age of 55 having less than 10,000 ringgit in their account,” he says.

The Malaysian government introduced seven stimulus packages totaling over $90 billion since the pandemic hit Malaysian shores early last year, including loan moratoriums, wage subsidies and special grants. And the EPF allowed members to withdraw from their retirement savings early to shore up their income.

But Amir Hamzah says the early withdrawals caused the share of members meeting the basic savings threshold – the minimum they should have in their accounts when they turn 55 years old – to decline to 27% from 36%.

“There will be far-reaching repercussions not only on their future well-being, but also on the government, who will have to carry that financial burden,” he warns.

The EPF set the basic savings threshold at 240,000 ringgit in 2019, the most recent adjustment.

Amir Hamzah says as the nation recovers from the pandemic, the EPF’s focus is on helping members to restore and rebuild their savings to ensure they can have a “dignified retirement”.

“We will remain focused on our strategic asset allocation and continue to be cognisant of the risk profiles of the markets as they develop so we are able to shift along the way,” he says.

The EPF, which is for private sector workers and the self-employed, has 14 million members.

The fund had 989.14 billion ringgit of investment assets as of end-June, up from 981.71 billion ringgit at the end of the first quarter.