KWASA DAMANSARA, 15 August 2023: The Employees Provident Fund (EPF) recorded a total investment income of RM33.19 billion for the first half of the year ended 30 June 2023 (1H 2023), an increase of RM9.44 billion, compared to the RM23.75 billion recorded in the corresponding period in 2022. The amount was after netting off listed equity write downs recorded for the period under review. Out of the RM33.19 billion total investment income, RM4.79 billion were generated from mark-to-market (MTM) gains of securities that have not been realised. The MTM gains were mainly due to the fluctuation of foreign exchange rates.

The EPF’s total investment income for the second quarter (Q2 2023) was RM18.03 billion, up RM9.05 billion from RM8.98 billion recorded in the same quarter last year. Equity investments continued to be the main contributor of income for Q2 2023 at RM9.60 billion. In comparison, the asset class generated RM4.07 billion of income during the corresponding quarter in 2022. A significant portion of the improvement was due to proactive and timely realisation of profit, supported by the MTM gains of securities. After taking into account write downs, these numbers accounted for 53% of the total investment income for the quarter.

Due to active portfolio management by the EPF’s fund managers, write downs for Q2 2023 were minimal at RM0.35 billion, compared to the RM2.15 billion recorded in the same quarter of 2022. Cost Write Down is an internal policy adopted by the EPF on its Listed Equity investment as a prudent measure to ensure the portfolios remain healthy.

EPF Chief Executive Officer Datuk Seri Amir Hamzah Azizan said, “The performance of the global equity markets in the first half of 2023 had been positive, led by a run-up in the developed markets, notably in the US which continues to show resilience despite the rise in interest rates. The EPF’s agility and adaptability in its investment strategy paved the way for the investment managers to take advantage and capitalise on the market rally, which contributed to the higher return from equities during the period. This is in contrast to the equity market performance seen in the first half of 2022, which saw several indices suffering significant declines, with most markets including the US posting their worst first-half performance in decades.

“For Malaysia, the 5.6% GDP growth in the first quarter of 2023 had surpassed expectations, driven mainly by firm domestic demand and improvement in the labour market. Resilient growth tempered tighter financial conditions, providing a floor for the domestic capital markets.”

Fixed Income Instruments, which serves as a capital preservation role, have been the anchor for the EPF investment portfolio and continues to provide stability for the EPF’s overall income. This asset class, comprising Malaysian Government Securities and Equivalents, as well as Loans and Bonds, contributed 27% or RM4.83 billion, to EPF’s total investment income for Q2 2023. Real Estate and Infrastructure registered an income of RM2.72 billion, while income from Money Market Instruments generated RM0.88 billion, in line with the return expectations set for these asset classes.

The EPF’s assets recorded strong growth on the back of higher income generated from its investments as well as the healthy net contributions received. As at June 2023, the EPF investment assets stood at RM1,082.45 billion, of which 38.6% were invested in overseas investments. The increase in overseas exposure was largely in part due to the positive movement in the global markets, pushing valuations of the EPF’s investment higher, as well as favourable foreign exchange movements. Excluding the movements of foreign exchange rates during the quarter, the EPF’s overseas investments would have been around 37.5%. The EPF’s overseas investments generated RM11.07 billion, or 61% of the total investment income recorded.

Meanwhile, the EPF’s domestic investments, which accounted for 61.4% of total assets, has grown by RM57 billion compared to one year ago. The EPF remains dedicated to supporting and contributing towards strengthening the domestic market by allocating more than 80% of its new annual investments to domestic investment.

During Q2 2023, a total of RM16.27 billion out of the RM18.03 billion investment income was generated for Simpanan Konvensional and RM1.76 billion for Simpanan Shariah. Simpanan Shariah derives its income solely from its portion of the Shariah portfolio while income for Simpanan Konvensional is generated by a share of both the Shariah and Conventional portfolios.

Aligning investment strategies with changing market dynamics

Despite the encouraging 1H 2023 economic data, the EPF remains cautious about global economic growth, which is expected to continue to face persistent challenges in the second half of 2023, as the effects of past monetary tightening, more restrictive credit conditions, and softening labour markets further test the resilience of global economic activity. Equity and bond markets will continue to remain fairly volatile given the varying expectations of the timing of the end of the hiking cycles by central banks, recession risks, policy uncertainty, and geopolitical tensions.

Malaysia’s economy nonetheless remains on track to grow within Bank Negara Malaysia’s projection of between 4% and 5% this year on the back of resilient domestic activities, supported by continued progress of multi-year infrastructure projects, healthy labour market conditions, and a moderation of inflation, which is expected to continue in the latter half of the year, bringing the full-year average between 2.8% and 3.8%.

“The EPF continues to align its strategies with changing market dynamics and capture prospects suitable with its risk profile and split under its Strategic Asset Allocation (SAA) that has been key to driving sustainable growth while remaining resilient against turbulent market conditions,” said Datuk Seri Amir Hamzah.

Surging membership numbers and contributions signal progress towards universal coverage and improvement in retirement adequacy

As at 1H 2023, the EPF continues to grow its membership to 15.90 million. Out of that amount, the EPF reached an all-time high of 8.47 million active members¹, which represent 50.2% of Malaysia’s 16.86 million² labour force. The increase of active members was 467,087, from 8 million in 1H 2022 to 8.47 million in 1H 2023.

New employer registrations also showed strong growth of 43,084 during the period, bringing the total number of employers registered with the EPF to 598,871. The increase of active members and employers translated into strong growth of contribution amount of RM50.48 billion in 1H 2023, an increase of 16.8% from RM43.23 billion in 1H 2022.

Malaysia’s steady recovery in labour market conditions and EPF’s ongoing efforts to encourage members to contribute voluntarily had helped the EPF to record a better active-to-inactive member ratio, which showed gradual improvement from 52%:48% in Q2 2022 to 53%:47% in Q2 2023.

Datuk Seri Amir Hamzah said the EPF remains committed to the future wellbeing of the more than 40% of the Malaysian workforce that are still not covered by any form of social protection. As Malaysia is witnessing an ever-growing shift towards informality and the emergence of the gig economy, the EPF is focused on widening its reach by actively deploying its mobile units to reach out to potential members to register with the EPF. As at June 2023, a total of 4,429 outreach activities were conducted.

The EPF’s continuous collaborations with Federal and State government agencies, civil society organisations and other stakeholders of social protection programmes have helped to encourage those from the informal sector to register with EPF’s i-Saraan, which is a voluntary contribution programme designed to allow workers in the informal sector or with no formal income to save for their retirement with the EPF. In 1H 2023, the total number of i-Saraan registered members increased to 1.07 million an increase of 48% from the 725,944 in 1H 2022.

Ramping up on voluntary contributions and widening coverage

To gauge the adequacy of retirement income, Datuk Seri Amir Hamzah said the benchmark the EPF uses to determine Basic Savings achievement by age is RM240,000, which serves as the minimum target upon reaching age 55. This, he said, translates to RM1,000 per month over a 20-year retirement period.

Seeing how the issue of savings adequacy is impacting EPF members’ wellbeing as they transition into their golden years, the EPF is ramping up on its Jom Tambah campaign to encourage members to voluntarily top-up their savings.

In 1H 2023, the EPF recorded a 36% growth in the number of voluntary contributors to 535,307 from 393,966 in 1H 2022. Total contributions accumulated was RM3.93 billion in 1H 2023, an increase of 46% from the RM2.70 billion accumulated in the corresponding period last year. Meanwhile, the number of formal sector members who opted to contribute more than the statutory rate³ was 31,128 in 1H 2023, compared to 9,765 in 1H 2022. Aside from members’ advisory services, the EPF is also actively reaching out to employers and strongly encouraging them to consider contributing more than the statutory rate of 12% or 13% (for employees earning RM5,000 per month or below). By increasing the retirement fund contributions, employers demonstrate a commitment to the financial wellbeing and security of their employees, improving the employers’ value proposition.

In addition to encouraging members to voluntarily top-up their savings, the EPF provides access to other quality products to enhance income security such as i-Sayang, a facility to enable husbands to voluntarily transfer a portion of their EPF monthly contributions to their wives account so they are able build long-term savings with the EPF; and the i-Lindung initiative under the Members Protection Plan where members can purchase a safety net to mitigate the financial impact of unexpected events.

These initiatives contribute significantly to the overall goal of fostering a financially resilient and protected community, where individuals and families can confidently navigate life’s uncertainties and achieve their long-term financial objectives. To help members plan for their retirement, the EPF conducts financial literacy programmes and personalised retirement and financial advice through its Retirement Advisory Services, which in 1H 2023 alone has recorded a total of 79,890 face-to-face advisory interactions.

The EPF’s efforts also involve enhancing the KWSP i-Akaun App, which aims to elevate customer experience by combining cutting-edge technology, personalised features, enhanced security, and informative articles to enhance financial knowledge so users are able to make more informed decisions about their money.

Datuk Seri Amir Hamzah said at the heart of this enhanced application lies the EPF’s dedication to putting the power of information and control directly in users’ hands.

“We understand that retirement planning is a journey that requires a careful approach. With the new features and functionalities of KWSP i-Akaun App, we aim to provide members with the necessary tools to navigate this journey with confidence and clarity,” he said.

To know more on the new KWSP i-Akaun App as well as ways to increase savings through voluntary contributions or contribute more than the statutory rate, log on to the EPF website at www.kwsp.gov.my or speak to any of the EPF’s Retirement Advisory Officers at any of EPF branches nationwide.

^{1. Active members refer to members who contributed at least once in the last 12 months}

^{2. Monthly Principal Statistics of Labour Force as at May 2023, Department of Statistics Malaysia, report released on 10 July 2023}

^{3. An employee and employer can choose to contribute at a higher rate than statutory rate of 11% (employee’s share) or 12% / 13% (employer’s share)}

Issued by the EPF Media Desk
Corporate Affairs Department
9 June 202