Banking & Saving
Skim Simpanan Pendidikan Nasional (SSPN)
Many people have heard of Skim Simpanan Pendidikan Nasional or SSPN, but few really know what it is about. Undoubtedly, most people know SSPN as the governments way of encouraging us to set up a piggy bank for our kid’s future education. But prepare to be surprised! Even though it is focused on building enough fund for your children’s education in the future, you too can benefit from SSPN. Find out how right here!
What is SSPN?
Skim Simpanan Nasional or better known as SSPN is a savings scheme designed by PTPTN for the purpose of higher education. In a nutshell, SSPN works like the typical savings account, but MINUS the ability to withdraw your money willy-nilly at any time. This SSPN savings scheme is perfect for new parents who wish to save for their children’s future tertiary education, be it in colleges or universities. What makes SSPN a good option as a future savings scheme is that it provides some pretty attractive incentives aside from mere savings : SSPN also comes with insurance coverage, matching grants for low income families, annual dividends, and the most attractive benefit, tax relief on your net savings in a particular year.
SSPN-i : A new and improved SSPN, with “i” standing for Islamic. (you don’t need to be a Muslim to apply though)
Who HAS to Open a SSPN-i Account
Those who wish to apply for a PTPTN loan must have an SSPN-i account with a minimum balance of RM20. However, do check with PTPTN before opening an account because they tend to change this particular rule every now and then.
Who CAN Open a SSPN-i Account
Any Malaysian is eligible to have a SSPN-i account. The best candidate for SSPN-i accounts are people with children or dependents, we will explain this in more detail below.
SSPN-i : Opening an Account
We’ll give you the step by step guide on how to open an SSPN-i account!
Step 1 : Determining Your Age Category and Eligibility
Age Group : 1 to 18 years
Account must be opened by parents / legal guardian. Account can be maintained until the child turns 28. After the age of 28, He or she has to open his or her own account.
Age Category: 18 to 28 years
Malaysians aged 18 to 28 have an option of opening their own accounts or have it opened by their parents / guardian.
Age Group : 29 and above
Malaysians aged 29 and above have to open their own accounts.
Step 2 : Where To Open Your SSPN-i Account
You can either open an account at the PTPTN service counter at One Stop Center in KL Sentral or at these following banks :
- Bank Simpanan Nasional (BSN)
- CIMB Bank
- Bank Islam
- Bank Rakyat
- Agro Bank
Step 3 : Documents needed
The documents that you need in order to open an account are as follows :
- Three copies of the account application form (Borang Permohonan Pembukaan Akaun) which can be obtained online OR can be obtained FREE at One Stop Center or Banks listed above.
- A copy of the depositor’s MyKad, military ID or Police ID
- A copy of the beneficiary’s birth certificate or MyKid or MyKad
- A copy of certificate of adoption / legal documents (for adopted beneficiaries)
- A minimum of RM20.00 is required to open an account (but typically more to qualify for SSPN benefits)
SSPN : Features & Benefits
What makes SSPN different from regular banks are the benefits that they offer, which we will list down for you!
1. Income Tax Relief (up to RM780 savings a year!)
This is the benefit that is the driving force for most people to open an SSPN account, but be warned the income tax relief only applies to:
- Parents or legal guardians who open an SSPN account for their children / child as the beneficiary are eligible for income tax relief up to RM3,000 per year. UPDATE: LIMIT INCREASED TO RM6,000 IN LATEST BUDGET 2013 ANNOUNCEMENT, FULL DETAILS HERE
- Working parents with separate tax submissions and separate SSPN accounts dedicated to the same beneficiary (the same child) are given a separate tax relief to the maximum of RM 3,000 to each parent per year.
- Parents with a joint taxation but own a separate SSPN account each, but for one child (the same child) will get up to the maximum of RM3,000 per year combined.
How do I benefit from the Tax Savings?
Note : Have a read of our Income tax article to know more ways on how to save on your personal income taxes! The personal income tax rate for Residents of Malaysia follows a progressive tax schedule, this means that the higher your chargeable income, the higher the tax rate you will have to pay (More chargeable income = More Tax). Chargeable income is not the same as your gross salary or actual income for the year (in fact chargeable income is usually much lower). To calculate your chargeable income, the formula is as follows:
Chargeable Income = Total income – Tax exemptions – Tax Reliefs
Example: Assuming your money comes from these sources:
Salary : RM60,000 salary per year
Local bank interest income: RM1,000
Property rental Income (p.a.): RM10,000
Total Income: 60,000 + 1,000 + 10,000 = RM 71,000.
All local banks are tax exempted, so your local bank interest income of RM1,000 can be deducted.
Tax Exemption = RM 1,000
Standard Individual Tax relief: RM9,000 individual tax relief as well as the Relief for EPF contributions: RM6,000 (your EPF contribution should have been 11% of RM60,000, ie RM6,600 but you only get to minus off max RM6,000).
Tax Relief: 9,000 + 6,000 = RM 15,000
Chargeable Income: RM71,000 – RM1,000 – (RM 15,000) = RM55,000.
How much is the tax for RM 55,000? Just use the table below to find out!
|Chargeable Income||Tax Rate||Cumulative Tax|
|From RM0 – RM2,500||0%||RM0|
|From RM2,501 – RM5,000||1%||RM25|
|From RM5,001 – RM10,000||3%||RM175|
|From RM10,001 – RM20,000||3%||RM475|
|From RM20,001 – RM35,000||7%||RM1,525|
|From RM35,001 – RM50,000||12%||RM3,325|
|From RM50,001 – RM70,000||19%||RM7,125|
|From RM70,001 – RM100,000||24%||RM14,325|
|RM100,001 and Above||26%|
Using the table above, your income tax for the year is RM3,325 + (19% x RM5,000) = RM4,275.00, making your effective tax rate equal to 6%. (RM4,275 / RM71,000).
If you save the full RM3,000 into SSPN during the year, your chargeable income will go from RM55,000 to RM52,000, resulting in an interest expense of RM3,325 + (19% x RM2,000) = RM3,705, saving you RM570.
By depositing into your SSPN-i account every year, you can reduce your chargeable income even further up to a limit of RM3,000. Depending on your tax rate, if your tax rate is 7%, you can save RM 210. If your income falls on the highest tax rate (26%), you can save RM 780 per year on your tax just by opening an SSPN-i account! That’s equivalent to 26% interest on top of any ‘dividend’ payments, making it the top savings account, beating every product out there. Obviously you only get the tax savings on the RM3,000 once, so over the long term the effective rate of interest will be lower when ‘averaging it out’.
I Have no Beneficiary (SSPN-i is My Own Account)
Most will probably wonder, can I still get this income tax relief benefit if I don’t have a beneficiary ie. you open an account for yourself? Unfortunately not. Opening your own account will not make you eligible for the income tax relief, plus you will be subject to the strict withdrawal restrictions (explained below).
2. Insurance Coverage
SSPN offers depositors free death insurance coverage, but only if the saving is RM 1,000 and above in the SSPN account. The terms for this coverage are as follows:
- Depositors aged 18 years – 65 years : Entitled to insurance coverage & death benefits
- Beneficiaries aged 1 day – 28 years : Entitled to death benefits
- Insurance coverage is split into two : General Insurance (For individuals) and Trust Insurance (Insurance Amanah-opened by head/management representative of orphanage)
- Insurance coverage is paid RM to RM for general insurance (up to RM 50,000)
- Insurance coverage is RM 100,000 for Insurance Amanah or Trust Insurance
- Death Benefit is RM 2,000 for depositors and RM 500 for beneficiaries
3. Yearly Dividend (Interest on Savings)
Another perk of SSPN is its yearly dividend rate or profit (this is effectively an interest rate, but as per Islamic principles its called a dividend). Its certainly not high or market leading (the best long term FD rates can give rates of 4% and above, see our Best FD Rates in Malaysia article), so with the withdrawal restrictions (explained below) in place, one would probably not chase this account for its high ‘dividend’. On a seperate note, this dividend income is exempted from income tax (its effectively interest, so treated the same as normal bank interest). In the past, the dividend rates were as follows :
4. Matching Grant for Low Income Families
The Matching Grant (Geran Sepadan) is another benefit of opening an SSPN-i account. Basically, a matching grant is a financial incentive that aims to help parents with an income of RM2,000 per month or less by giving them financial endowment of up to a maximum of RM10,000. Quite obviously, the sole purpose of this incentive (other than to help ease the financial burden of lower income parents) is to encourage low income depositors to deposit more money and increase their SSPN account savings.
Depositors with children and have a combined household income of RM 2,000 or less at time of account opening. The matching grant will become eligible as soon as a child is accepted into a diploma or degree in a higher learning institution approved by the government.
Combined household income : Income from father + mother < RM 2,000
Matching Grant Amount : How much Will I get?
If you fit the eligibility terms above and thinking of applying for a matching grant, the amount depends on your savings and savings period. Naturally, the higher and longer your savings, the more you will get (but maximum is RM 10,000).
PTPTN is notorious for its ever changing terms and conditions, but here are the new rules for applying a matching grant:
Depositors who Open an SSPN-i Account From 15 January 2010 - Eligibility for the matching grant is based on the depositor’s family income during savings withdrawal or account closing. A copy of the latest salary slip / income statement certified by an authorised person and a copy of MyKad / military card / police card of the spouse is needed for depositors with a monthly family income (basic salary) not exceeding RM2,000 for consideration of the matching grants during savings withdrawal or closing of the account.
Existing Depositors with an SSPN-i Account Before 15 January 2010 - However, for existing depositors who opened an account before 15 January 2010, determination of eligibility for the matching grant remains the same, that is, based on family income of the depositor during account opening. A copy of the salary slip / income statement produced during the opening of the account must be certified by an authorised person and copy of MyKad/military card / police card of the spouse is needed for depositors with a monthly family income (basic salary) not exceeding RM2,000 for consideration of the matching grants.
SSPN : Disadvantages
SSPN comes with quite a few attractive advantages, but it also has its downsides.
Income Tax Relief is NOT Available for Individual With Own SSPN Account
As this account aims to promote savings for higher education and not for individual interest, the income tax relief is not made available unless you have a legal beneficiary for your account (your own children OR a child under your legal care OR immediate family members).
So to summarise, you can still open an account for your nephew, auntie, best friend etc. but unless you fall under the categories above, you will not be given the income tax relief!
Withdrawing Your Money
Unfortunately, withdrawing money from your SSPN account is not a simple task! Unlike the normal savings account, SSPN has very strict rules when it comes to withdrawing your money.
Depositors can only withdraw their money once a year, and the maximum amount that is allowed to be taken out is RM 500 or 10% of your total savings!
A 100% withdrawal is possible but will require the beneficiary’s offer letter to local university or colleges, a vague statement on the beneficiary ‘no longer wishing to participate in the educational process’, or in the event of the beneficiaruy’s / depositor’s death or incapacitation.
Should I Open an SSPN Account?
Ahhh…to open an account or not to open an account? Ultimately, it all depends on you, but if you do not have a beneficiary, you won’t be eligible for the income tax relief so we probably say given the withdrawal restrictions and variable interest, for long term risk-free savings, best to plop your money in the top rate FDs in Malaysia.
If you have children or just been blessed with a child and want to start savings for your child’s education, SSPN is definitely a good option for your child’s education savings thanks to its income tax relief benefit on the RM3,000 limit, which will dwarf any other type of savings income in the market.
However, if you’re looking for ways to save your money for your children beyond the RM3,000 yearly limit, you may want to know more about junior savings accounts in Malaysia here.