KUALA LUMPUR (Dec 14): The Employees Provident Fund (EPF) is taking a cautious stance on the global equity markets, including Malaysia's in 2018, warning of a possible market reversal after the current bullish rally.
Its chief executive officer Datuk Shahril Ridza Ridzuan said as an active participant in the equity market, it makes sense for the pension fund to adopt a more cautious approach, as it realises bull markets typically do not last forever.
“For 2018, I think you have to take some caution on the global side, in an environment where central banks are starting to tighten their monetary policy and increase interest rates. Some of the euphoria in the equity market may start to disappear, (resulting in) the market coming (back down) to a valuation that is probably a bit more rational in the long term,” he told a media briefing today.
“In Malaysia, it’s very dependant on the growth of corporate profits which has been relatively good for 2017. For 2018, we generally expect the market to continue to progress pretty well, but the worry is always there that it would not progress as well as the market would like it. Then, valuations will start to have to reflect those actual earnings as well,” Shahril added.
Earlier, the EPF announced four enhancements to its schemes and policies which will take effect on Jan 1, 2018, as the fund anticipates a majority of its members to face increasing challenges in preparing for their retirement, with the dramatic demographic shift facing both Malaysia and the world, as well as the advent of the next industrial revolution.
"Therefore, these enhancements are to keep pace with changes in members’ needs and expectations,” Shahril added.
One of the initiatives include an option to appoint Amanah Raya Bhd (ARB) as the nominee/administrator or trustee to their EPF savings.
"This would be especially beneficial for members with children below 18 years old. This new option is in addition to members’ existing right to appoint any individual persons as nominees," the EPF added.
Another enhancement to its schemes and policies is that members with Age 55 and Age 60 withdrawal policies will be able to make partial withdrawals of any amount at any time, as opposed to the current policy that only allows withdrawals of a minimum of RM2,000 once every 30 days.
"In addition, members who choose to make monthly withdrawals will be able to withdraw from as low as RM100 per month, as opposed to RM250 in the current policy," the EPF added.
Meanwhile, the flexible withdrawal policy — which allows members to withdraw any amount at any time for partial withdrawals — has been extended up to age 100, from the current age cap of 75 years old.
Members may also opt to make a combination of monthly and partial withdrawals. This enhancement is in line with the extension of dividend payment from age 75 to 100, the EPF said.
The EPF has also extended the current death benefit of RM2,500 claimable if the member dies before age 55, until age 60, which is in line with the national retirement age at 60 years old.
The EPF is also undertaking a reclassification exercise to distinguish between accounts with savings and dormant accounts, in order to present a clearer understanding of the makeup of the workforce in Malaysia.
"Starting the third quarter of 2017 (3Q17), the total number of EPF members will be based on accounts with savings only. This will later be reflected in the upcoming EPF Annual Report 2017,” Shahril said.
All dormant accounts will remain open for members below 75 years old, in order to provide them with the opportunity to re-contribute to their account for their retirement well-being, Shahril added.
As at Sept 30, 2017, there are 17.8 million EPF account holders, of which 13.73 million will be used in 3Q17 onwards, while the remaining 4.08 million are dormant accounts.
Out of the 13.73 million EPF members, 7.06 million are active and the remaining 6.67 million are non-active.
In terms of the number of employers, a total of 493,229 will remain registered under the ‘employer’ status from 3Q17, while 54,850 will be re-classified as self-employed.
According to the EPF, total contributions recorded in 3Q17 rose 7.87% year-on-year to RM15.9 billion from RM14.74 billion, bringing total accumulated members’ contributions to RM715.97 billion.
The Age 60 Lump Sum Withdrawal saw a total of 12,811 applications approved, amounting to RM280.66 million, while the Age 60 Flexi Withdrawal recorded 29,712 approved applications, totalling RM662.05 million.