The ‘soft’ launch of Malaysia’s voluntary Private Retirement Scheme (PRS) in July 2012 was greeted with much fanfare, but what is it exactly, and how can savers / investors / residents in Malaysia benefit? Find out in our article here!
NOTE: This is not an article about the Employers Provident Fund (EPF), which is Malaysia’s mandatory Private Retirement Scheme, for more on the EPF, see the full EPF Guide.
What is the Private Retirement Scheme (PRS)?
In short, the PRS is a defined contribution pension scheme which allows people (or their employers) to voluntarily contribute into an investment vehicle for the purposes of building up their retirement income.
In a Malaysian retirement framework, it is to be complemented with (and not a substitute for) the mandatory contributions made by both employee and employers to the EPF scheme.
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.
Similarities of PRS with the EPF:
1. Retirement Purpose: Both the EPF and PRS schemes are for building up a person’s retirement assets and income.
2. Tax Benefit: Tax relief is given for contributions to both schemes (up to RM6,000 a year for EPF, a seperate RM6,000 for PRS)
PRS vs EPF: A Summary
|Contribution Amount||No statutory minimum or maximum||Statutory minimum (11% Employee, 12-13% Employer)|
|Contribution Frequency||No statutory interval||Statutory Monthly Contribution|
|Contribution Paid to||Individual PRS Providers||EPF Directly|
|Yearly Personal Tax Relief||RM3,000||RM6,000|
|Partial Withdrawal||From Sub-Account B only, and 8% Tax Penalty||Account 2 only, specific reasons no penalty|
|Selection of Fund Investments||Freedom of Selection (among PRS Providers)||Freedom only on Partial Amount (EPF-MIS)|
|Dividend Policy||No statutory minimum (depends on Fund performance)||Minimum 2.5% p.a.|
The PRS Providers are fund management firms which are approved by the PRS administrators to manage the investment vehicles that contributions get paid into.
The eight PRS Providers approved (as of 25th April 2013) are:
- AmInvestment Management Sdn Bhd;
- AIA Pension and Asset Management Sdn. Bhd
- CIMB- Principal Asset Management Bhd
- Hwang Investment Management Berhad
- Manulife Asset Management Services Bhd (formerly known as Manulife Unit Trust Bhd)
- Public Mutual Bhd
- RHB Investment Management Bhd
- Kenanga Investors Bhd