THE Employees Provident Fund (EPF) has projected that if every member opts for a one-time transfer from Account 2 to Account 3, the total amount involved would reach RM57 bil, according to CIMB Research.
Additionally, the pension fund anticipates an initial outflow of around RM25 bil from Account 3 within the first year, based on withdrawal patterns observed during pandemic-related schemes. This outflow is expected to gradually moderate to a range of RM4.0 bil to RM5.0 bil annually thereafter.
Despite these projections, CIMB Research indicates that the EPF foresees no significant impact on its portfolio. However, it notes that maintaining liquid assets carries a trade-off in terms of returns.
Furthermore, CIMB Research suggested that the outflow from Account 3 might coincide with the regular withdrawal rate of conditional Account 2 withdrawals, thus tempering overall withdrawals.
“Withdrawals for emergency needs tend to be more urgent for B40 and M40 members, which hold RM11 bil and RM180 bil in total savings respectively.
“However, EPF previously estimated in 2021 that 60% of members had exhausted Account 2 balances due to COVID-19 schemes, suggesting that potential outflows could be moderated if the T20 segment are motivated to keep savings by the retention of a uniform dividend rate across all accounts for the time being,” CIMB Research noted.
The EPF is set to restructure Accounts 1 and 2 for members under the age of 55 into three accounts, effective from May 11. These three accounts include Akaun Persaraan for retirement (Account 1), Akaun Sejahtera for pre-retirement lifecycle needs like housing, education, and medical expenses (Account 2), and Akaun Fleksibel for short-term financial needs (Account 3).
Under the new structure, mandatory and voluntary contributions will be allocated at a ratio of 75:15:10 for Account 1, Account 2, and Account 3, respectively.
Furthermore, members will have the option to transfer funds from Account 3 to the more restrictive accounts or from Account 2 to Account 1, but not vice versa.
CIMB Research predicts that the outflow from Account 3 may impact the demand for Malaysia Government Securities (MGS) /Government Investment Issue (GII) in the short term.
However, it believes that this impact will be mitigated by strong net contributions, ample onshore liquidity and repatriation efforts by government-linked companies and investment entities.
The firm also anticipates that robust labor markets and wage growth will contribute to sustained net contributions and asset under management growth, which will help offset any adverse effects on MGS/GII.
“It is also supported by upside to EPF contributions arising from the shift of new civil servants into a defined contribution retirement plan, strong onshore liquidity as seen in auction over-subscriptions and GLC/GLIC/corporate repatriation and conversion of foreign investment income or export proceeds,” it added. – April 26, 2024
