Tiered EPF dividends could backfire, experts caution [WATCH]

Industry experts warn that introducing tiered EPF dividends may weaken the fund's investment scale, prompt early withdrawals and be seen as a penalty for long-term contributors with larger balances. Dr Ong Kian Ming, an adjunct professor from Taylor's University, believes that such a model may erode trust in the EPF. A tiered dividend system could lead to more early withdrawals among higher earners, he added, noting that the EPF may also see reduced self-contributions.

Khazanah Research Institute (KRI) proposed a progressive dividend model as part of broader retirement ecosystem reforms, including extending the retirement age and deepening progressive contributions. Dr Mohamad Idham Md Razak, from Universiti Teknologi Mara, echoed these views, emphasizing that a tiered structure could unintentionally encourage withdrawals or reduce voluntary contributions, particularly for those with larger balances.

Aimi Zulhazmi Abdul Rashid, an economic analyst at Universiti Universiti Teknologi Mara Business School, suggested that instead of tiered dividends, a single base dividend for all members with a targeted top-up or bonus dividend for accounts below a certain threshold would be more effective.