Malaysia's largest pension fund is set to declare its highest dividend rate in more than two decades. The Employees Provident Fund (EPF) is expected to pour more than RM40 billion (S$13.5 billion) - the most ever - into the accounts of 14 million workers just weeks before an expected general election.
This comes on the back of increased payouts by other state fund managers, such as national equity fund Permodalan Nasional Berhad (PNB) and pilgrimage fund Tabung Haji.
"We have been informed it will definitely be higher than before," an EPF board member told The Straits Times ahead of today's expected dividend announcement.
The EPF, which manages RM800 billion in assets, declared a dividend of 5.7 per cent last year and 6.4 per cent in 2016, with total payouts amounting to RM37 billion and RM38 billion, respectively.
EPF chief executive Shahril Redza Ridzuan also said last month that the country's largest asset manager is set to continue a five-year track record of beating inflation by at least 3.5 percentage points, far surpassing its self-imposed target of a minimum real dividend of 2 per cent.
He said this just before Malaysia revealed that last year's inflation was 3.7 per cent. This means that the EPF dividend would have to be at least 7.2 per cent to match the fund's performance in the past five years. Prime Minister Najib Razak is expected to call for elections soon after a final parliamentary session in April.
His ruling coalition will face an unprecedented challenge, with the opposition led by long-serving former premier Mahathir Mohamad, whose 22 years in charge were largely remembered as a period of economic prosperity for Malaysia.
The last time the pension fund handed out more than 7 per cent was in 1996, before the currency crisis that plagued Asian markets in the next two years. The EPF's best dividend since then was 1999's 6.84 per cent.
That was when Tun Dr Mahathir was still in power.
Between 1981, when he first took office, and 1997, when the downturn struck, the EPF's annual payout averaged close to 8 per cent.
Analysts have noted that last year was a good year for equities, both local and global, which should allow Malaysian fund managers to improve on previous returns.
"Based on the EPF's investment and portfolio assets performance, it is not surprising that the dividend rate may be higher than 6 per cent," Sunway University Business School economics professor Yeah Kim Leng was reported as saying by The Sun.
PNB, which manages nearly RM300 billion of savings, had in December announced a 7 per cent dividend - higher than its previous 6.75 per cent rate. It also added a 40th anniversary 1 per cent bonus for the first 10,000 units held in more than nine million Amanah Saham Bumiputera accounts.
It also declared a 5 per cent dividend for its variable-price fund Amanah Saham Nasional, resulting in a year-to-date return of 15 per cent for 1.2 million holders.
Meanwhile, Tabung Haji, the Muslim pilgrimage trust, said on Wednesday that 9.3 million accounts will receive a 4.5 per cent endowment, with the 8.7 million subscribers who have yet to perform the haj receiving an additional 1.75 per cent bonus. These trump the previous rates of 4.25 per cent and 1.5 per cent, respectively.
