MALAYSIA: Malaysia’s Employees Provident Fund (EPF) is more than just a retirement savings scheme; it is a financial powerhouse that offers long-term growth, often outpacing other investments such as real estate and even Singapore’s Central Provident Fund (CPF).
According to Singaporean financial expert Loo Cheng Chuan, Malaysians are “sitting on a gold mine,” as reported by The New Straits Times (NST). With consistent returns exceeding 5%, sometimes reaching 6%, EPF stands out as a wealth-building tool that can transform financial futures.
EPF versus CPF: A clear advantage
A key reason why EPF is so powerful lies in its superior return rate compared to Singapore’s CPF. “Over the last 10 to 20 years, EPF’s return rate has been well above 5%, sometimes reaching 6%,” Loo noted. In contrast, CPF’s Ordinary Account offers a mere 2.5% return, which he described as “hardly enough to beat inflation.” While CPF’s Special and Medisave Accounts offer a slightly better 4%, their usage is far more restrictive.
This disparity means that Malaysians have a unique advantage over their Singaporean counterparts when it comes to long-term wealth accumulation. The compounding power of EPF, when left untouched over decades, can generate substantial wealth, something that many Malaysians often underestimate.
The power of compounding
One of EPF’s most remarkable features is the power of compounding, which Loo believes makes it “an unrivalled financial tool.” He explained, “If you put a dollar into your EPF and let it compound over 20 or 30 years, it will easily bring you four or five times the return.”
Even with lower wages in Malaysia compared to Singapore, EPF’s strong returns can offset this disadvantage over time. “Let’s say the average return is about 6.5%,” Loo said. “If you compound over 35 years, the return rate is nine times. If you put in S$100,000, it will become S$900,000 by the time you turn 65.” This highlights why Malaysians should prioritise growing their EPF savings early and allow them to multiply over time.
Resilience despite economic and political challenges
Sceptics often worry about Malaysia’s political and economic uncertainties, particularly the ringgit’s depreciation. However, Loo pointed out that EPF has demonstrated remarkable resilience over the decades. “EPF has survived so many crises, the Asian Financial Crisis, the 1MDB (1Malaysia Development Berhad) saga, multiple prime ministerial changes, and it still thrives,” he said.
This track record shows that despite external pressures, EPF remains a stable and high-performing investment vehicle. Its ability to weather financial storms and still deliver strong returns makes it a reliable pillar for long-term wealth accumulation.
Is property investment overrated?
Many Malaysians view real estate as the ultimate investment, often overlooking the potential of EPF. Loo challenged this mindset, urging Malaysians to make a direct comparison: “Malaysians are insanely obsessed with property, but have you ever compared S$100,000 put in EPF versus S$100,000 in property over time?”
While real estate can be lucrative, it comes with risks such as market fluctuations, liquidity issues, and maintenance costs. EPF, on the other hand, provides a hands-off, steady, compounding return without the need for active management. For many, it may offer a safer and more predictable way to build long-term wealth.
Public response to EPF and the power of compounding
The strong performance of EPF has not gone unnoticed by those who have experienced its benefits firsthand. One YouTube commenter highlighted the fund’s stability and sound management, stating, “EPF is actually very well managed in Malaysia. For someone who has worked quite a long time already, we have known this ever since.” This reinforces the idea that EPF’s reliability is not a recent phenomenon but a long-standing reality for many Malaysians.
The concept of compounding also resonated strongly with viewers. As one user remarked, “Mr Loo makes eminent sense! Many people underestimate the power of compounding; it is indeed one of the wonders of the world. I speak from experience.” This reflects the sentiment that while compounding is a well-known financial principle, many still fail to grasp its full potential when applied to EPF.
Loo’s insights were also appreciated for fostering cross-border financial discussions. A viewer encouraged further dialogue, saying, “Mr Loo, please continue to have such dialogue with Malaysian counterparts, good perspective from both sides.” This highlights the value of financial education and the need for more discussions on wealth-building strategies.
Overall, the public response underscores the practicality of Loo’s advice. As one commenter simply put it, “Very practical advice.” The recurring themes in these responses—confidence in EPF’s management, the overlooked power of compounding, and the need for continued discussions—suggest that more Malaysians are beginning to recognise the immense potential of EPF as a wealth-building tool.
Maximising EPF for a secure future
Given EPF’s undeniable advantages, Loo encouraged Malaysians to maximise their contributions as early as possible. “This is the time to take advantage of it—put in as much as possible when you’re young and let it compound without touching it,” he advised.
Diversification remains important, but EPF should be the cornerstone of any long-term financial strategy. With its strong historical performance, resilience in times of crisis, and the power of compounding, EPF is one of the most effective tools Malaysians have for securing their financial future. As Loo put it, “People like us would envy such a system. This is one of the most incredible wealth-building machines in the world.”
Read more: EPF’s rising dividends: Win for some, but many are left behind
Featured image by Do More – Take Charge of Your Life (for illustration purposes only)