Professional Documents
Culture Documents
Power Point EPF
Power Point EPF
APEC Workshop on Meeting The Challenges of Ageing Society, Shanghai, China. October 16-17, 2007
- 11.36 million
- 27 million - USD 83.16 billion - USD 79.57 billion
IMPACT
PUBLIC SCRUTINY
Trustee/Ownership
PRESENTATION ROADMAP Background Governance Investment Risk Management Challenges Way Forward Questions & Answers
5.05 death/1,000 population Mortality Rate: Life Expectancy (at birth): Male: 71 years Female: 76 years Poverty Rate Hardcore Poverty Rate: 5.7% 1.2%
Social Welfare Department Ministry of Health Workmen Compensation Scheme 1952 Employment Act 1955
Customer First Vision: To be a leading social security organization in the world and the best government agency in Malaysia Teamwork Mission: Provide retirement benefits to members; convenient system to employers; challenging working environment to employees and socio-economic development to the nation Continuous Improvement
Integrity
BACKGROUND History The EPF was established on 1 October 1951. It is governed by the EPF Act 1991. The EPF is a national compulsory savings scheme. It provides retirement benefits for the private sector and nonpensionable public sector employees. The employees and their employers pay monthly contributions to the Fund and the contributions are then credited into the individual members account to which interest or dividend is added annually.
Employees contributions
Employers contributions
Dividend
PreRetirement Withdrawals
= =
RETIREMENT SAVINGS
To receive and recover contributions. To maintain members and employers accounts. To invest the funds. To return the savings to members through the various withdrawal options.
2003
2000 1990
10.42
9.97 5.94
4.91
5.04 2.94
355226
318,218 174,289
1980
1970 1960 1952
3.76
1.96 1.14 0.52
2.82
1.57 1.03 0.50
109,658
58,000 15,874 11,918
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2004
2003 2000 1990 1980 1970 1960 1952
237,106
217,051 179,047 45,642 9,261 2,193 629 17
11,758
11,046 10,542 3,259 637 119 31 0
240,362
220,161 181,518 46,680 9,481 2,240 633 28
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WITHDRAWAL
CONTRIBUTION
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BACKGROUND Coverage Compulsory - All private sector employees. - Public sector employees(prior to be placed on pension scheme and those who have opted for EPFs scheme). Voluntary - Self - employed - Domestic helpers - Public sector employees - Foreign workers
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EMPLOYEE
11 9 11 9 11 10 9 6
EMPLOYER
12 12 12 12 12 12 11 7
TOTAL
23 21 23 21 23 22 20 13
1952
- Jun 1975
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Self employed persons can elect to contribute between RM 50.00 and RM 5000.00 per month.
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1. Retirement withdrawals On attaining age 55 years a member can choose to do any of the following : withdraw total savings in lump sum, withdraw total savings monthly, or part of the savings in lump sum and the balance on a monthly basis.
2. Other full withdrawals A member can withdraw all the savings: When a member is permanently incapacitated. Members nominee/next-of-kin can withdraw upon members death. When a members leaves the country permanently (revokes his/her Malaysian citizenship).
EMPLOYEES PROVIDENT FUND
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A member can withdraw part of the savings: To purchase/build and to reduce housing-mortgage loan. On attaining 50 years of age. For health care and. For education of members and members children.
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BACKGROUND Benefit & Withdrawal 5. Additional benefits: Death Benefit of RM2,500 is paid to the next-of-kin upon a members death. Incapacitation Benefit of RM5,000 is paid to a member upon Incapacitation. (Provided the member has not attained age 55).
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BACKGROUND Tax Incentive Employees share of EPF contributions together with life insurance premium of up to RM6,000 is tax deductible. Employers share of EPF contributions of up to 19% is tax deductible. EPFs returns on investments are not taxed. All pre-retirement and retirement withdrawals are not taxed.
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PRESENTATION ROADMAP Background Governance Investment Risk Management Challenges Way Forward Questions & Answers
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BOARD
INVESTMENT PANEL
MANAGEMENT
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GOVERNANCE EPF Board The EPF Board is a statutory body under the Ministry of Finance. The Board formulates policies and guidelines and ensures their implementation. The Board comprises : - Chairman - Deputy Chairman - 5 representatives of the government (inclusive of the Deputy Chairman) - 5 representatives of the employees - 5 representatives of the employers - 3 professionals - Chief Executive Officer (ex-officio)
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GOVERNANCE Investment Panel The Investment Panel is responsible for the investment of the funds. The Panel consists of : - Chairman - 1 representative of the Ministry of Finance - 1 representative of the Central Bank - 3 experts in finance and investment - Chief Executive Officer (ex-officio) Members of the Board and Investment Panel are appointed by the Minister of Finance.
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LEGAL DEPT.
OPERATION DIVISION
SERVICES DIVISION
CEO
INVESTMENT DIVISION
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CORPORATE GOVERNANCE The EPF is the single largest institutional investor in Malaysia. EPF has ensured that the companies in which it has invested practice good Corporate Governance (CG): Establishing the Group Minority Shareholder Watchdog
Setting-up within EPF a dedicated unit to engage and monitor public-listed companies on CG issues :
to attend and exercise proxy voting in companies AGM and EGM. to collaborate with other institutional shareholders on CG issues detrimental to institutional shareholders.
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CORPORATE GOVERNANCE
Whilst advocating CG in companies the EPF invests, it is also crucial for the EPF itself to practice good CG. Good CG practices will ensure integrity, optimal performance and instill confidence of our stakeholders in EPF. In EPF, we have adopted CG practices as one of the key performance measures in our Balanced Scorecard. We have designed a CG Index to measure and monitor the implementation of good CG practices.
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CORPORATE GOVERNANCE Corporate Governance Measure- CG Index The key components of the CG Index: Transparency Independence Accountability Focus Risk Management Regulatory Compliance Fairness Social Awareness Responsibility Environmental Responsibility
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CORPORATE COVERNANCE
STAKEHOLDERS COMMUNICATIONS
1. 2. 3. 4. 5.
Dissemination of Annual Statement of Accounts to Members Tabling of Annual Report in Parliament Advertising Annual Report in the News Papers Advertising Quarterly Performance Reports in the News Papers Dialogue Sessions with Companies that the EPF holds Substantial Stocks
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PRESENTATION ROADMAP Background Governance Investment Risk Management Challenges Way Forward Questions & Answers
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1. The Board may subject to subsection 18 (2) of the EPF Act 1991 invest moneys belonging to the Fund in the following manner: (a) To be deposited in: Central Bank of Malaysia; Bank licensed under the Banking and Financial Institutions Act 1989 (Act 372); Any other financial intuition duly licensed under the Banking and Financial Institutions Act 1989 and approved by the Minister;
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INVESTMENT The Power of Board to Invest (b) To be invested in: Shares of any public company listed on the stock exchange established in Malaysia; Debentures of any public company (c) To be invested in:
Malaysian Government Securities (MGS), bonds, mortgage papers, commercial notes, bankers acceptances, money market papers, private debt securities, and promissory notes.
(d) To provide loans to Federal or State Government.
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2.
The Board with the approval of the Minister may invest the
Funds moneys: a) Deposited in any bank or financial institution established by or under written law;
b)
c) d) e)
Joint venture;
Privatization programme; provide loans to any company incorporated under the Companies Act 1965; Investment outside Malaysia
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INVESTMENT Growth of Asset from Year 1985 2006 (in Ringgit Malaysia)
350
300 265.2 250 222.2 200 186.9 163.8 150 132.4 98.72 100 72.67 53.22 50 24.55 0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 31.19 41.23
290.3
RM (million)
2006
YEAR
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Equity 3%
MGS & Equivalent 84% Equity External Managers 1985: USD 7.53 billion (Domestic) 3.1% Internal Equity (Domestic) 16.7% Over the years, EPF has expanded its investments from traditional assets being Government Bonds to risky assets.. Money Market Instruments 4% Fixed Income Managers 2%
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Loans/bond 28.8%
In House 94.5%
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INVESTMENT Governance
MINISTRY OF FINANCE
EPF BOARD
EPF ACT 1991 SECTION 18 - provides for the establishment of the Investment Panel and specifies its members SECTION 26 - confers powers to invest
INVESTMENT OPERATION
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PRESENTATION ROADMAP Background Governance Investment Risk Management Challenges Way Forward Questions & Answers
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Strategic Risk
Credit Risk
Market Risk
Investment Risk
Liquidity Risk
Operational Risk
Regulatory Risk
Reputation Risk
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Increase risk awareness at all level of staff in order for them to effectively perform risk identification, measurement, control and on-going monitoring. Enable EPFs BOD to comply with its organisational obligations and duties of care and diligence in accordance with the Malaysian Code on Corporate Governance (MICCG). Accountability, assurance and governance Maintain integrity and confidence amongst EPFs stakeholders and the public in general.
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RISK MANAGEMENT Risk Management in the EPF Strengthening EPFs competitive strategy and efficiency to increase long-term stakeholders value. operational
Safeguarding assets and resources. Exploitation of opportunities. Improved planning, performance and effectiveness. Improved information for decision making. Minimise unexpected impact on earnings and returns to Members.
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Investment Panel
Board of Directors
Internal Audit
External Audit
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Risk owner
Control owner Management Action Plan (MAP) owner Risk Champion Individual staff
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1. 2. 3. 4. 5. 6. 7.
Full support from the Board, Investment Panel, CEO and Management. Committed Risk Champion. Competence and committed consultant. Effective Project Management. Risk Awareness Training and Facilitation Workshop. Computerised System. Organisation culture.
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FINANCIAL
INTERNAL PROCESS
L1 Internalisation of corporate culture Performance based Knowledge sharing Customer centric Continuous innovation
DRIVERS
IPLANNED OUTCOMES
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PRESENTATION ROADMAP Background Governance Investment Risk Management Challenges Way Forward Questions & Answers
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CHALLENGES 1. Adequacy of retirement savings a) Low savings In 2006, average savings at age 54 for: Active members RM114,403 (USD 32,780) Inactive members RM 21,479 (USD 6,154) Male members RM 129,563 (USD 37,124) Female members RM 81,483 (USD 23,347) b) Increase in life expectancy (at birth) 2000 71.3 (M) 75.9 (F) 2006 71.4 (M) 76.0 (F) 2020 75.4 (M) 80.4 (F) 2. Method of withdrawal payments Lump sum : may use up money in a short period of time.
EMPLOYEES PROVIDENT FUND
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4.
5.
6.
7.
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PRESENTATION ROADMAP Background Governance Investment Risk Management Challenges Way Forward Questions & Answers
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WAY FORWARD Enhance Customer Experience Adequacy and Coverage of Scheme Human Capital Development Technology Innovation Business Process Reengineering (BPR), Core System Replacement (CSR), EServices & Customer Delivery. On-going benefit and service improvements. (Revamping of the EPF benefit scheme at administration) New EPF Scheme for new members. Multi-pillar approach
Incremental Innovation
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PRESENTATION ROADMAP Background Governance Investment Risk Management Challenges Way Forward Questions & Answers
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vijay@epf.gov.my
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