Capital Guaranteed return of 19%-39% p.a. for the Self-Employed


In the course of my work, not many self-employed are aware the our EPF has such a an interesting scheme.


A deep dive into this scheme has got me open my eyes as much as I could. Yes! A capital guaranteed with a 19%-39% per annum return on investment. In my years of investing, it is impossible to find a capital guaranteed product with a return of that magnitude.


How did I arrive at the percentage. Let's look into it. It may get dry but definitely worth it.


The amount that most of us would probably save with EPF is RM4,000 in order to qualify us for tax relief.

  1. The scheme, i-Saraan has a 15% Government matching contribution up to a maximum of RM250. (The scheme will end in 2022).

  2. Assume that EPF pays a dividend of 4% per annum.

  3. The individual tax bracket between 8% - 21%.


My calculation:


Amount contributed to EPF = RM4,000.

  1. Government matching contribution = RM250

  2. Dividend from EPF = RM160

  3. Tax savings from EPF contribution = RM320 - RM840 (tax bracket between 8% - 21%). The effective capital would then be RM3,160 - RMRM3,680 being contributed to EPF.

The total return received is between RM730 - RM1,250.


Against our capital of RM3,160 - RM3,680, isn't that a whopping 19%-39% return on capital.


After 2022, the total return received is between RM480 - RM1,000. That is still a 13%-31% return on capital.


Do this for 10 years, this exercise would give us an EPF balance of RM46,741.18 whereas our effective capital is only between RM31,600 - RM36,800.


The amount may be too trivial for some of us, but where else can you find a capital guaranteed return with a return of such magnitude?


In the investment world, the capital can be guaranteed, however, it comes with cost which will dilute our return on investment. As for guaranteed return, it is almost next to impossible to find such a product. But for most of the man in the street, we would love a product which guarantee our capital and return. Let me know if there one around because our fixed deposits does not give us the best of both world!

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