Dividends
The EPF declares an annual dividend on funds on deposit which has varied over time, depending on investment results.
Legally, the EPF is only obligated to provide 2.5% dividends (as per Section 27 of the Employees Provident Fund Act 1991).[7]
The EPF claims that the lowered dividend is the result of its decision to invest in low-risk fixed revenue instruments, which produce lower returns but maintains the principal value of its members' contributions. This is due to the EPF primarily aimed at providing a stable financial security of its members.[8]
In addition, the EPF further elaborates dividend rates and their performances are calculated and influenced based on the full distribution of net EPF revenue, depending on the return on investments that in turn is based on asset allocation.[9]
The EPF also attributes the declining interest market rate since 1996 to the interest market rate. Because 75% of investment funds are concentrated towards bodies closely linked to trends in the interest market rate, including Malaysian Government Securities, loans or bonds, and money market instruments, low interest rates for the past few years had an adverse effect on returns for EPF investments.[9]
In April 2007, criticism was raised at a proposed amendment of EPF guidelines (the EPF Bill (Amendment) 2007) that cuts monthly contributions of members above 55 years by 50% (6.2% from 11% for employees, and 5.7% from 12% for employers).[10] The change was described as a disadvantage to tens and thousands of members compared to those under the pension scheme as the former is not given free medical treatment after retirement, and was described as a form of discrimination towards senior members.[10] Under the proposal, an employer of foreign workers may also optionally contribute RM5 monthly per head, raising concerns of employers' preferences towards foreign employees.[10] The government responded by claiming that the proposal may be studied,[11] and later states that members can contribute at any amount above the slashed contributed amount.[12] The EPF guideline for employers of foreign workers remains unchanged, citing that the policy has been implemented before in 1998.[12]
