Yesterday,Malaysia Prime Minister Najib Tun Razak announced the voluntary private retirement scheme(PRS) as an alternate employee pension scheme in addition to Employee Provident Fund(EPF) which is compulsory in Malaysia.
There will be a range of private investment funds to choose.Individuals depending on their own retirement goals,needs and risk appetite could choose several funds to invest in for a long term.
Like EPF,the total investments in PRS will also separate into two accounts.Account A could only be withdrawn on reaching the legal retirement age (currently it’s 55 years old) whilst Account B could be withdrawn once a year from one year after the first contribution of any approved fund.However,since the tax on the income contributed under the scheme is exempted,the pre-retirement withdraw will entitle a tax penalty of 8% on the withdrawal amount.
Malaysia government encourages the employers to participate in the scheme as currently most Malaysians don’t have enough funds for their retirements.Employers who contribute aove the statutory rate up to 19% of employee’s remuneration could have tax deductions and another tax deduction on employers’ contributions to the scheme for their employees is also being proposed.Additionally,individuals contributing to the PRS approved by Securities Commission could have personal tax relief up to RM 3,000 according to Budget 2012.
Initially only a few investment companies are approved by SC to offer funds under the scheme:AmInvestment Management Sdn Bhd, American International Assurance Bhd, CIMB-Principal Asset Management Bhd, Hwang Investment Management Bhd, ING Funds Bhd, Manulife Unit Trust Bhd, Public Mutual Bhd and RHB Investment Management Sdn Bhd.
It’s highly suggested that individuals need to read and understand the disclosure documents and not solely rely on advertisements as no guaranteed return will be provided by any fund.
As what I know,individuals will be able to switch funds between different companies,however,there will always be some terms and conditions,as well as charges,which are not clear yet.The management fees are not disclosed either.Well,I hope at least it has to be lower than the normal funds.
From the latest news,the scheme will start to run from this coming October.I believe more details will be explained at that time.By the time,the government has set up Private Pension Administrator(PPA) to monitor the whole scheme running.You could also get some information there if you’re interested in it.