Employees Provident Fund (EPF) should not underestimate the required savings amount for retirees and exercise caution before allowing contributors to withdraw their savings for investments in unit trusts until out of the total 42 Trust Fund Management Companies (TFMs) that lost RM 600 million in 2006 are removed
___________________
Press Statement
by Lim Guan Eng
________________________
(Petaling Jaya,
Tuesday) :
EPF should not underestimate
the required savings amount
for retirees and exercise
caution before allowing
contributors to withdraw
their savings for investments
in unit trusts until they
have removed 33 out of the 42
TFM that lost RM 600 million
in 2006. EPF chief executive
officer Datuk Azlan Zainol
said today that from February
1 2008, contributors will be
able to withdraw part of
their funds and channel them
to approved investment
programmes such as unit
trusts.
Currently, contributors can
only do so if they have in
excess of RM 50, 000. EPF has
fixed the “required amount”
of savings as RM 120,000
which means only those
amounts in excess of RM
120,000 can be invested in
unit trusts approved by the
EPF. EPF is making two
erroneous assumptions. The
first erroneous assumption is
that the sum of RM 500 a
month is sufficient to enable
a retiree to live over a
20-year period until he or
she is 75 years old, the
average life expectancy of
Malaysians.
This assumption is wrong as
RM 500 monthly is not enough
when it is even below the
poverty level of RM 691 per
month in Malaysia (RM 661 for
Peninsular Malaysia, RM 88
for Sabah and RM 765 for
Sarawak). In fact this RM 500
per month is just above the
hard-core poverty level of RM
415. A monthly income of RM
1,000 for rural areas and RM
1,500 for urban areas is
necessary to ensure retirees
can enjoy a reasonable
standard of living, including
high medical bills. This
would require required
savings of RM 240,000 for
retirees living in rural
areas and RM 360,000 for
those living in urban areas.
EPF should not forget that
its primary duty is to ensure
a sufficient savings pool for
retirees to enable to live in
dignity and not in poverty as
a reward for their
contributions towards
nation-building and economic
development. Malaysia would
not be where it is today
without the hard work and
sacrifice of these retirees.
EPF has an onerous task to
ensure that there is
sufficient required savings
for retirees and that these
savings are not placed under
undue risk of loss. That is
why the second assumption
made by EPF that its list of
approved investments for EPF
contributors are sound and
risk-free is wrong when EPF
does not have a good track
record in identifying
reliable and well-performing
TFMs.
As a national savings scheme,
the EPF main function is to
provide basic financial
security for retirement. In
its commitment towards
preserving and growing the
savings of its members in
accordance with best
practices in investment and
corporate governance,
prudence is the guiding
principle.
In this regard, DAP regrets
the failure of EPF to act
last year on the poor
performance of trust fund
management institutions
resulting in the value of
those investing in unit trust
funds dropping by RM 600
million from the initial
value in investments of RM
9.76 billion when it was
first introduced in 1996 to
RM 9.15 billion in December
2005. 33 TFMs out of the 42
TFMs appointed or a high 78%
recorded negative returns.
Such poor performance is
shocking and EPF must answer
why it has failed to remove
the 33 TFMs that lost RM 600
million from the EPF Panel to
protect EPF members investing
in loss-making unit trust
funds since 1966. Up to now,
EPF members do not know which
are the loss-making TFMs and
these should be weeded out to
ensure only the profit-making
performers TFMs remain. To
allow the loss-making TFMs to
continue to manage EPF
members’ funds is most
irresponsible,
unprofessional, unethical and
a complete breach of EPF
statutory obligation to
protect the interests of its
members.
Instead of allowing
contributors to take out
their money, EPF should
concentrate on improving
their performance by
increasing the rates of
returns to investments so as
to give contributors a higher
dividend rate. EPF’s dividend
rate should be increased from
the present 5.15% to its
15-year golden period from
1980 to 1994 of 8 to 8.5%.
There is no doubt that the
EPF Investment Panel MUST
assumes full responsibility
of their dismal performance
in running investments in the
EPF as compared to Lembaga
Tabung Angkatan Tentera (LTAT).
If LTAT can declare a
dividend, bonus and special
bonus of 15.75% in 2004, why
is it that EPF declared only
a 4.75% dividend for the year
2004? In 2005, EPF declared a
dividend of 5%, whilst LTAT
declared 15.75%. Last year,
EPF declared a dividend of
5.15% as compared to LTAT’s
15%.
EPF contributors and retirees
would be better served if EPF
changes its Investment Panel
to be replaced them with the
Investment Panel of LTAT to
enjoy rates of 15%, which is
three times better than that
attained by EPF.
(23/10/2007)
* Lim Guan
Eng,
Secretary-General of DAP |