Private Retirement Scheme (PRS) Frequently Asked Questions
KEY FEATURES OF PRIVATE RETIREMENT SCHEMES (PRS)
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:
|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
|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.