Experts warn EPF’s projected 5.8-6.3% dividend for 2025 must be viewed against inflation, as real purchasing power is key to retirement security.
PETALING JAYA: Malaysians may welcome the Employees Provident Fund’s (EPF) projected 5.8% to 6.3% dividend for 2025, but experts said the figure alone does not guarantee a secure retirement as rising living costs and inflation could erode real purchasing power.
Putra Business School associate professor Dr Ida Md Yasin urged contributors to focus on real returns, which measure the actual increase in purchasing power after inflation.
“When we talk about real interest rate, we calculate it as nominal interest rate minus inflation. For example, if the dividend is 5.8% and inflation is 2%, the real return is 3.8%. That is the actual gain in what your money can buy.”
Ida said Malaysia has seen relatively moderate inflation of between 2% and 4% in recent years but official Consumer Price Index (CPI) figures may not fully reflect household spending.
“The CPI basket focuses on essentials. Individual spending patterns vary, so some households may feel costs rising faster than the headline figure suggests.”
Addressing concerns that EPF members might tap savings for short-term expenses, she clarified that withdrawals are governed by strict rules.
“There is no provision for festive withdrawals. Account One is primarily for retirement while Account Two allows withdrawals for designated purposes, such as buying a house or funding education.”
She added that early or unnecessary withdrawals could erode long-term savings due to lost compounding.
“The more you withdraw early, the less you benefit from future dividends. Over the long term, this could seriously affect retirement adequacy,” she said.
EPF will announce its 2025 dividend on Saturday at a media briefing chaired by its CEO Ahmad Zulqarnain Onn. The announcement will be closely watched by more than 16 million members, reflecting EPF’s performance across local and overseas equities, fixed income, real estate and infrastructure.
For the year ended Dec 31, 2024, EPF declared a 6.3% dividend for conventional and syariah accounts, with total payouts of RM73.24 billion – RM63.05 billion for conventional savings and RM10.19 billion for syariah savings.
Historically, EPF dividends have outperformed commercial bank fixed deposits, offering contributors relatively attractive returns.
“We can be proud that EPF has consistently delivered better returns than fixed deposits. This encourages higher national savings and provides some comfort for households relying on EPF as their main retirement fund,” said Ida, adding that sustained competitive dividends reinforce positive saving habits.
However, she added that retirement adequacy remains a concern as EPF performance is tied to domestic and global economic conditions.
“Malaysia is a trading nation, so international developments affect businesses and in turn, EPF investments,” she said, adding that the projected dividend indicates relatively solid investment performance over the past year.
She also highlighted risks from geopolitical tensions, particularly in the Middle East, which could disrupt global supply chains.
Under current rules, contributors can withdraw full EPF savings at age 55, although discussions are ongoing about raising the age to 60.
Ida said some members exhaust their savings early but this is mostly due to individual financial behaviour, not flaws in the system.
“The projected 2025 dividend is encouraging, but long-term retirement security depends on disciplined saving and prudent financial planning, not dividend rates alone.”
