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Private Retirement Scheme (PRS) Frequently Asked Questions

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Q: Why should I invest in PRS?

A: Having a voluntary scheme in addition to the EPF also allows private company employees and self-employed persons to voluntarily contribute towards their retirement in a systematic way. Additionally, the Malaysian Government’s Budget 2012 specifies a tax relief of up to RM3,000 for 10 years beginning 2012 for contributions to the PRS. This is similar to the tax relief given to EPF contributions. For top tax rate payers, this amounts to a saving of RM780 a year. A tax exemption is also given on all income generated by the PRS Funds.

Q: What is a private retirement scheme?

A: 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. Each PRS will include a range of retirement funds that individuals may choose to invest in based on their own retirement needs, goals and risk appetite. The fund options under a PRS must be consistent with the objective of building savings for retirement and ensure that there is a prudent spread of risk.

Q: I am interested in joining a private retirement scheme, how do I go about doing so?

 

A:  Firstly, contact the PRS Provider of your choice and indicate the fund which you to invest in. Similarly, you may open a Private Pension Administrator (PPA) account by completing an account opening form that can be obtained from any PRS Provider or the PPA website (www.ppa.my). Do take note that you will be required to provide identification (such as your MyKad, Malaysian police/armed forces ID of passport if you are non-Malaysian). You will be given a life-time account number and password after opening an account.

 

 

Q: How will my employer make the voluntary PRS contribution on my behalf?

 

A: If your employer wishes to contribute to PRS on your behalf, he or she may enter into an arrangement with a PRS Provider. It is up to the employer to do so with one or more PRS provider of choice. The contribution amount will be determined by the employer you as an employee have the right to choose the type of fund(s) under the Scheme provided by the relevant PRS Provider.

 

Where employees do not make a fund selection, the employer contributions

would be channelled to the default option of the chosen PRS Provider.

 

Employer contributions may be subject to a vesting schedule which means the

entitlement may only be vested to an employee’s account based on their terms

of service.

 

 

 

 

 

Q: Where can I obtain information when making a decision to contribute to PRS?

 

A: Potential members must receive the following documents before

contributing to any fund under the Scheme:

 

 - Product highlight sheet, which provides a summary of the key

information of the fund(s) under the Scheme written in basic terms; and

 

 - Disclosure document in electronic or printed form, which

will provide more comprehensive information on the PRS. The

objective is to enable the investor to make an informed investment

decision.

 

• Contributors are advised to read and understand the disclosure

documents and not solely rely on advertisements.

 

 

Q: Who are the official or approved PRS providers in Malaysia?

 

A: You may view the list of approved PRS Providers and their Schemes on the PPA website.

 

 

Q: All right, I am ready to sign me up! But is there anything else I should be considering before choosing my PRS?

 

A: Yes. When considering which PRS to sign up with, you should take into account a few critical factors such as your age, personal and household income, risk tolerance, retirement objective as well as the suitability of the different funds under the various Schemes to meet your retirement needs as well as the fees and charges of the funds.

 

For example, some basic considerations would be:

 

Stage of Life

You May Want To Consider a PRS that Leans Towards:

Reason:

Young, single and just started working

Higher risk instruments that can potentially generate higher returns

Retirement is still a long way to go, and appetite for risk is quite high

Self and spouse are working as middle managers,  and have young children

Balanced investment portfolio

Moderate risk appetite, still a significant number of years away from retirement

Approaching retirement

Stable and conservative investments

Low risk appetite, plus expectation of possible large monetary gain from Employees Provident Fund (EPF) withdrawal

Some of the questions you may ask yourself when considering your place in the above table include:

 

  • Are you young and single?

 

  • Are you and your spouse both making an income and have a young family?

 

  • Are you at the mid-career stage of your life, or are you approaching retirement age?

 

  • Are you looking for steady returns?

         

 

  • How fast would you like to grow your retirement fund? Slowly, moderately or very quickly?

 

  • Are you looking for medium or high returns?

 

Remember, your investment needs may change as you adapt through different stages of your life. Hence, set your retirement goals for the long term. Ensure that you regularly review your PRS portfolio to make sure that it matches your retirement objectives while not forgetting to include long term factors such as cost of living and estimated cost of inflation.

 

 

Q: How would I keep track of my PRS contribution?

 

A: Members will be able to check online via the PPA website or you contact the relevant PRS Provider directly. Members will also receive statements on a periodic basis from the respective PRS Providers and a consolidated statement on their investments from the PPA.

 

 

Q: Is it possible to withdraw my PRS contributions?

 

A: Yes, but with certain conditions and restrictions. Among them are:

 

 - After the day the member reaches retirement age, which is

currently 55;

 

 - Following the death of a member;

 

 - Permanent departure of a member from Malaysia; or

 

 - For pre-retirement withdrawals.

 

* With respect to pre-retirement withdrawals, members may only

withdraw the amount in sub-account B from each PRS Provider once

a year. The first pre-retirement withdrawal can only be requested by a

member one year after making the first contribution to any fund under

the Scheme (whether the contribution is by an employer or member).

While pre-retirement withdrawal may be made for any reason, a tax

penalty of 8% on the withdrawal amount will be deducted by the PRS

Providers before the balance is credited to the member’s account.

 

While lump sum withdrawals are permitted, we recommend PRS members retain their savings for continuous investment under the respective Schemes.

 

 

Q: While saving money in my PRS, I died. What happens next?

 

A: When a member dies, their savings will be paid to the executor,

administrator or named beneficiary. The Scheme Trustees will be required to release all or part of the balance where required pursuant to a grant of probate or letters of administration.

 

For further information on PRS, please feel free to contact Securities Commission Malaysia (SC) at +603 6204 8000 or emailing [email protected] , or visit the SC website at www.sc.com.my

© Securities Commission Malaysia (SC). Considerable care has been taken to ensure that the information contained here is accurate at the date of publication. However no representation or warranty, express or implied, is made to its accuracy or completeness. The SC therefore accepts no liability for any loss arising, whether direct or indirect, caused by the use of any part of the information provided. The information provided is for educational purposes only and should not be regarded as an offer or a solicitation of an offer for investment or used as a substitute for legal or other professional advice. For enquiries regarding sharing, republishing or redistributing this content please write to: [email protected].

Key Features of Private Retirement Schemes (PRS)

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Have you ever thought about retirement? Regardless of which stage you are currently at in your career, retirement is something you cannot avoid thinking about.

Have you ever thought about retirement? Regardless of which stage you are currently at in your career, retirement is something you cannot avoid thinking about. Whether you are on the verge of retirement or many years away from it, do you think you have enough or will have accumulated enough savings for retirement? Does your retirement fund only consist of your monthly Employees Provident Fund (EPF) contributions? Do you wish your retirement fund went beyond just your EPF?

          If yes, you may want to consider investing in a Private Retirement Scheme (PRS).  The PRS was launched in July 2012 by Prime Minister Yang Amat Berhormat Dato Sri' Najib Tun Abdul Razak, with the objective of offering Malaysian employees and the self-employed an additional avenue to save for their retirement. It also offers an opportunity for employers to make additional voluntary contributions towards the retirement savings of their employees. In this article, we will discuss the key features of the PRS. After reading this article, you will be able to identify the key features of the PRS and gain a better understanding of it, enabling you to make an informed PRS investment decision.

Key Features of PRS:

  • PRS are schemes where the accumulated benefits to members are determined by the amount contributed plus investment returns thereon.

 

  • Members have the option to contribute to more than one fund under a PRS or to contribute to more than one PRS, offered by different PRS Providers.

 

  • There are no fixed amounts or fixed intervals for making contributions to PRS, it is entirely up to the investor and on a voluntary basis.

 

  • A default option will be made available for members who select their

PRS Provider but do not specify a fund option. It is the responsibility of the PRS Provider to switch their members to default funds in accordance with the relevant age group.

 

Growth Fund

Moderate Fund

Conservative Fund

Age Group

Below 40 years of age

40-50 years of age

Above 50 years of age

Parameters

Maximum 70% equities

 

Investment outside Malaysia is permitted

 

Maximum 60% equities

 

Investment outside Malaysia is permitted

 

80% in debentures/fixed income instruments of which 20% must be in money market instruments and a maximum of 20% in equity

 

Investment outside Malaysia is not permitted

 

Individuals:

Members choose PRS Providers and funds according to their risk

appetite and investment profile

 

or

 

Default option for members who select their PRS Provider but do not

specify a fund option

 

Employers:

Employer may channel contributions to a particular PRS Provider, with

employees choosing the type of funds offered by that Provider

 

or

 

Employer may channel contributions to a particular PRS Provider, and

where employees do not make a fund selection, contributions can be

channeled to default option of that PRS provider

 

  • Members would also have the option to switch funds within a PRS at any time,

or change to another PRS Provider once a year, subject to terms imposed by the PRS Provider. The first transfer can only be requested by a member one year after making the first contribution to any fund under the Scheme.

 

  • All contributions made to PRS will be split and maintained in sub-accounts

A and B as follows:

The value of sub-account A and B can increase or decrease according to the unit price. The unit price is the worth of each unit held by a member from day to day. Units are priced daily.

  • In order to provide efficiency and convenience for members, a single PPA is

established to keep track of their PRS contributions as well as to maintain records of all PRS related transactions made by members. The PPA will not manage funds internally or accept contributions but will facilitate instructions from members.

 

  • Individual investors will have just one account for better management of retirement savings as information from various sources can be consolidated within one account.

 

  • The diagram below shows an example of an individual channelling contributions

to several funds under a PRS offered by different PRS Providers.

  • Tax incentives are provided to both employers and individuals for the first 10 years from assessment year 2012; in addition to the tax deduction permitted for EPF contributions:

 

 - Individuals - tax relief of up to RM3,000; and

 

 - Employers - tax deduction on contributions to PRS made on behalf of their

employees above the statutory rate of up to 19% of employees’ remuneration

for a period of 10 years.

 

 A tax exemption is also provided on income received by the funds under the

Schemes.

 

 

Regulatory safeguards to protect interests of members

 

  • The regulatory framework set out under the Capital Markets & Services Act 2007 (CMSA), which includes the PRS Regulations, PRS Guidelines and PRS Eligibility Requirements for PRS Providers, provide for high standards of regulation and conduct.

 

  • Under the PRS Guidelines, PRS Providers must provide cost effective voluntary

retirement schemes and ensure that Schemes are operated in a proper and efficient manner. The funds are segregated via a trust structure so that members’ assets are protected under the controls of an independent trustee company.

 

  • PRS Providers, Trustees and the Administrator must by law act in the best interests of members.

 

  • Prudential investment limits for funds within the Scheme are provided for under the PRS Guidelines. The investment policies of the funds under the Scheme must be consistent with the objective of building savings for retirement and ensure that there is a prudent spread of risk.

 

  • The disclosure framework ensures transparent and frequent information to members by requiring clear, concise and effective disclosures to be made to investors so that investors are fully informed of the investment strategy, the risks associated with the Scheme and all relevant fees and charges involved.

 

 

  • Action will be taken if there are any false or misleading statements to investors.

 

  • Reminder:

 

- Unit prices and distribution payable, if any, may go down as well as up.

 

 - As with all investments, the returns from contributions made to PRS are not

guaranteed and will depend on the performance of the PRS funds.

 

Brought to you by Securities Commission Malaysia, as part of its ongoing efforts to create well-informed and savvy investors in the capital market. The information provided in this article is only for educational purposes and should not be used as a substitute for legal or other professional advice. For more information, log on to www.investsmartsc.my, call 03-62048888 or visit our Facebook page at www.facebook.com/InvestSmartSC

© Securities Commission Malaysia (SC). Considerable care has been taken to ensure that the information contained here is accurate at the date of publication. However no representation or warranty, express or implied, is made to its accuracy or completeness. The SC therefore accepts no liability for any loss arising, whether direct or indirect, caused by the use of any part of the information provided. The information provided is for educational purposes only and should not be regarded as an offer or a solicitation of an offer for investment or used as a substitute for legal or other professional advice. For enquiries regarding sharing, republishing or redistributing this content please write to: [email protected].