Changes to the Retirement Fund Act 2007 which governs pension fund Retirement Fund Inc, or KWAP, has created a bit of a stir
First is removing Bank Negara (BNM) representative from KWAP’s investment panel. Second is asking officials of the fund to be sworn to secrecy on unpublished information even after they have left office.
KWAP website lists Che Zakiah Din as the central bank’s rep on the investment panel.
On the KWAP board, the BNM rep is deputy governor Datuk Muhammad Ibrahim.
The rationale of having a BNM rep on the board of KWAP’s investment panel is to haver oversight of its investments, which is a strong argument. So why do away with this requirement?
Could it be because the scope of KWAP’s investments now extends to include instruments issued by BNM and therefore there might be a conflict of interest? But if that was the case, one can also argue that KWAP should refrain from investing in the shares of listed companies which its investment panel members are actively involved in.
Another contentious amendment is a new clause which stipulates that the members of the board, investment panel, committees and officers of the fund or even any other person attending any meeting, are sworn to secrecy even after they have left office.
We can understand that such a rule might be needed to stop investment panel members from engaging in insider trading activities as they would be privy to privileged information. But extending the gag to the period after a person has left the fund is odd and might also be in breach of the Whistleblower Protection Act.
On a second note, we think it is almost certain that full withdrawal from EPF would only take place at 60 years of age.
Possible actions can be taken
For business owners – if you are already contributing more than required in the statutory requirement into EPF, you can consider contributing your additional employer portion into PRS (not corporate version, not the RM 3k tax relief for individual)
For non-business owners – if you feel you can consistently outperform 6-7% of annual return after fees, using EPF account#1 eligible amount to invest into unit trust funds (Kenanga Growth is one consistent performer) is one option. There are a few options to invest directly into KLCI stocks as well but after 1 April 2015, this will be limited as investor no longer could DIY invest in stocks (but rather it has to be assisted by a fund manager like Phillip Capital discretionary mandate) simply because historical data shows most investors who uses their EPF to DIY invest into stocks loses money and EPF role is to safeguard people’s retirement fund.