EPF Expected to Pay Lower Dividend for 2011

Economists predict that Employees Provident Fund (EPF) dividend payment to ease to around 4 to 5 percent for 2011 from 5.8 percent in 2010. Among the economists that expect this are from Malaysia Rating Corp Bhd (MARC), RAM Holdings Group and Allianz Life Insurance Malaysia Bhd.

For the past 10 years, EPF’s dividend ranged from 4.25 to 5.8 percent with an average of 5 percent. For previous year dividend, kindly refer to “Historical EPF Dividend Rate” page.

The reasons for lower dividend payments are,

• Uncertainty on major economies could impact Malaysia economies.
• Present market correction may continues in the next few months.
• Struggling of European economies and high unemployment in the US.
• Difficult to find investible instruments for the RM10 to RM12 billion net contributions for 2011.
• Moderate return from equities due to rising inflationary risks and the more moderate economic recovery path.
• Moderate gross domestic product (GDP) growth anticipated for 2011 in between 5 to 6 percent. In 2010, EPF’s pay of 5.8 per cent corresponds to a strong rebound of the economy where the GDP expanded 7.2 percent.

EPF would also find it hard to enhance or balance its portfolio towards safe and higher yielding asset classes to achieve the highest possible returns without compromising its mandate of capital preservation.

As of 31st December 2010, EPF has a total asset of RM440.5 billion.

Since, EPF expected to pay only between 4 to 5 percent in dividend for 2011, do you think it is wise to withdraw and invest in other fund?