EPF investment in 1MDB guaranteed by Government - CEO

The RM200 million 1Malaysia Development Bhd (1MDB) bond subscribed to by the Employees Provident Fund (EPF) in 2009 is not risky as it is guaranteed by the government, said EPF CEO Datuk Shahril Ridza Ridzuan.

He said the bond is highly secured and there is no risk to EPF's investment.

"It (government guarantee) is the highest form of security," he said on the sidelines of the International Social Security Conference 2015 here today.

He said EPF puts the same confidence in its exposure totalling RM1.52 billion in 1MDB subsidiaries Panglima Power Sdn Bhd (PPSB) and Jimah Energy Ventures Sdn Bhd.

Shahril said the exposure is from EPF's involvement in funding the two power plants through straightforward infrastructure bonds in 2003 and 2005 respectively, before 1MDB took over the companies in 2012 and last year.

"The investments in the two power plants are fully ring-fenced as the credit of the underlying assets is very solid.

"We shall secure against the power plant assets as well as the cash flow from the sale of energy.

"Cash flow generated from the power plants will be used to settle the debt first before paying any kind of dividend to shareholders," he added.

Meanwhile, Shahril said following the conclusion of EPF's scheme improvement initiatives poll yesterday, EPF will bring up the findings to the Finance Ministry to seek the best way to implement the scheme.

He said the polling results showed overwhelming response from members for the new initiatives and EPF would try to implement them as soon as possible.

"The initiatives are important to protect the retirement future of the members, so the faster we can do it, the better," he added.

In the survey, 94.4 percent of 96,448 respondents wanted full withdrawal of funds to remain at age 55 and also for new contributions made between the ages of 55 and 60 to be withdrawn at age 60.

The survey also saw 74.6 percent of members agreeing to the proposal that EPF contributions be based on wages stipulated by minimum wage legislation, and 61.3 percent supported the initiative to extend dividend payments from age 75 to 100.

Seventy-one percent of respondents also agreed with the proposal to allow members to switch to a Shariah-compliant retirement savings from the existing retirement savings scheme.

On other developments, Shahril said he is not aware of any proposal to merge EPF's 65 percent-owned unit Malaysia Building Society Bhd with Kuwait Finance House (M) Bhd.

He also denied any knowledge regarding Bank Negara Malaysia's (BNM) intention to pull out its representative from the fund's board of directors.

"As far as we are concerned, we are not aware of any changes on the EPF side. That is something you need to ask BNM and the Ministry of Finance," he added.

Deputy Finance Minister Datuk Chua Tee Yong in in his winding up speech on the Retirement Fund (Amendment) Bill 2015 in Parliament said BNM requested to pull out its representatives from the Social Security Organisation (Socso) and EPF.

Chua said the central bank's move comes after the government's tabling of a proposed amendment to the Retirement Fund Act 2007 in Parliament recently, which will see the removal of BNM's sole representative from Kumpulan Wang Persaraan Diperbadankan (KWAP), also known as the Retirement Fund Inc.

He added that the removal was also on BNM's request to avoid a conflict of interest, due to the fact that it is a regulator and hence should not be involved in KWAP's investments.

Themed "Sustainable Social Security Ecosystem within an Ageing Society", the two-day conference beginning today was jointly organised by EPF and JP Morgan Asset Management, and garnered about 400 participants.