The government has been concerned about the inadequacy of EPF savings for the retirees. The statistics show that 50% of contributors exhaust all of their EPF savings within five years of retirement and only 18% of active members aged 54 have adequate savings of at least RM173,000. To overcome this problem, Private Retirement Scheme (Scheme) was introduced in the 2012 budget in October 2011.
PRS is being administer by Private Pension Administrator (PPA). After more than a year, the government has approved 8 funds & they will be ready to accept fund soon.
The main features of PRS, is a voluntary long-term investment scheme designed to help individuals accumulate savings for retirement. It complements the mandatory contributions made to EPF and contributor will be entitled for tax relief up to RM3,000 per annum until 2021.
Below are the full description of PRS.
| Description | |
|---|---|
| What is PRS? | A private retirement scheme (PRS) is a voluntary long-term investment scheme designed to help individuals accumulate savings for retirement. It complements the mandatory contributions made to EPF. |
| Contribution Type, Amount and Frequency | PRS is fully on a voluntary basis. There is no minimum amount or frequency for the contribution. |
| PRS Account | PRS is split into two accounts. 70 per cent in Account A and 30 per cent in Account B. |
| Tax Benefit | – Contributors will be entitled for tax relief up to RM3,000 per annum until 2021.
– Employers will also be given tax deduction on contributions to PRS made on behalf of their employees above the EPF statutory rate up to 19% of the employees’ remuneration. |
| Withdrawal | – Partial withdrawal can be made from account B. Withdrawal can be made for any reason with 8% tax penalty on the withdrawal amount.
– Full withdraw upon reaching 55 years old, death or emigration. |
| Dividend | Solely depend on the fund’s performance. |
| Approved PRS Providers | 1. AmInvestment Management Sdn Bhd 2. American International Assurance Bhd 3. CIMB-Principal Asset Management Bhd 4. Hwang Investment Management Berhad 5. ING Funds Bhd 6. Manulife Unit Trust Bhd 7. Public Mutual Bhd 8. RHB Investment Management Sdn Bhd |
| Approved Funds | Each PRS provider has multiple funds. Check with PPA website or PRS Provider directly |
| Fees | Each fund has different fee structure. Check with PPA website or PRS Provider directly |
| Fund Choices | Contributor may contribute to more than one fund under the same providers or to more than one providers. A default option would also be made available. |
| Fund Switching | Contributors are allowed to switch funds within the same PRS Provider at any time, or change to another PRS Provider once a year. |
| Account Monitoring | Members will be able to check online via the PPA website or contact the relevant PRS Provider. |
| How to join? | – Contact your chosen the PRS Provider. Must be at least 18 years old. Proof of identification (Identification card / Police / Armed Force ID (for Malaysians) or Passport (for foreigners) is required for account opening.
-You may open a PPA account by completing an account opening form. Once opened, you will receive your life-time account number and password. |
For the tax relief, which category will this be under?
I assume it is not under the EPF and life insurance (max RM6k), or insurance premium (max RM3k).
We have yet to see 2012 Tax Return form to confirm it fall under which category.
It will be under new category.
I see there are a still many misconceptions about PRS that makes investors reluctant to invest in PRS. Just to clarify :
– PRS does not require regular and fixed contribution by depositors; you have freedom to decide when to contribute, how much to contribute, and you are free to invest in as many types of funds as you like
– If you have an EPF account you can still have a PRS fund; it’s not like they have to be one or another. In fact, they complement each other because some may think that EPF savings will not be enough to fund their retirement.
– Additionally, Malaysians between the age of 20-30 years old are entitled to a one off contribution incentive of RM500 by the government until the end of 2018