EPF members to benefit from reduced service charges

PETALING JAYA: Eligible Employees Provident Fund members investing under Members Investment Scheme (EPF MIS) will be entitled to a reduction of upfront fees charged by fund management institutions starting May 1,2020.

The reduction is for a period of 12 months ending April 30,2021. This will allow them to diversify their retirement portfolio at a lower cost, EPF said in a statement.

“For investments made through agents, the upfront fee will be reduced from a maximum of 3% to a maximum of 1.5%, while no upfront fees will be imposed for investments transacted through i-Invest via EPF i-Akaun, ” added the statement.

Eligible and financially literate members can use the lower fees structure to optimise returns and diversify their portfolio, said chief EPF officer Alizakri Alias.

“The timing is also opportune as the current market downtrend offers opportunities to invest in undervalued funds, “ he said.

But he stressed the need for members to do proper research and analysis of funds.

The EPF will also be reducing the service fee charged to fund management institutions by the EPF for the same period by 50%.

This is to help ensure the continued health of the fund management industry during the current challenging times.

The service fee, which will be reduced to 0.0625% from 0.125%, is based on the assets managed by the fund management institutions, and it is not charged to the fund or members, added EPF.

For members aged 55 and above, transacting through i-Invest, the service fee charged to the fund management institutions by the EPF, is now reduced to 0.125% from 0.250% per withdrawal amount.

Areca Capital CEO and fund manager Danny Wong said EPF’s move to lower the upfront fees will act as testing ground to gauge interest among members to invest.

“On the other hand, the lowering of such fees could be sending a signal that low fees may be here to stay.

“In that case, there might be some loss of income for industry players, “ he said.

Another seasoned fund manager who asked not to be named said while the lowering of fees is welcomed, he believes a better model for EPF to employ is to transfer all of its funds meant to be invested, to third party fund management institutions and earn a fee from these entities.

“In that case, EPF won’t need any investment staff and can become lean.”

“Why is EPF needing to charge fund management companies when the funds are being managed by these companies and not EPF?” he asked.