Retirement Planning “Sendiri Mau Ingat”

Many of us desire and dream of a comfortable retirement. Plenty of golfing, holidays abroad, beautiful house, comfortable ride, good health and time for masjid and religious as well as charitable activities. We know that money shrinks over time. We know if we retire at age 60, we must plan latest 20 years before (ie. Age 40). God willing, mortality rate of Malaysian averages age 80. We also know that upon retirement, we may need more for medical cost and supplements to slowdown the wear and tear, and perhaps slowdown the aging process.

So, sendiri mau ingat la…

Knowing is one thing, doing is something else. So, lets take a big step in the right direction. Start your plan now. And realize this, the market size of PRS is forecasted to grow from zero to RM30.9 billion in 10 years and RM73 billion by year 2020 [as at 31 March 2012 E*F funds RM488.5 billion, asset under fund management Rm435.36 billion]. Huge, huge market !

Recently, our PM has launched the Private Retirement Scheme (PRS), giving retirement planning in Malaysia a big jolt. With almost daily media attention and advertisements, 8 selected providers should launch the PRS pretty soon. The selected 8 are :

1. AmInvestment Management Sdn Bhd

2. American International Assurance Bhd

3. CIMB­Principal Asset Management Bhd

4. Hwang Investment Management Bhd

5. ING Funds Bhd

6. Manulife Unit Trust Bhd

7. Public Mutual Bhd

8. RHB Investment Management Sdn Bhd.

[Unit Trust Consultants and Insurance agents from other than the 8 providers above are welcome to contact us to be our licensed PRS Consultant. So, don’t loose out on this huge opportunity]

PRS as defined by Securities Commision (SC) :

“A private retirement scheme (PRS) is a voluntary long­term investment scheme designed to help individuals accumulate savings for retirement. It complements the mandatory contributions made to E*F.

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.”

 

Remember E*F – is Compulsory Provident Fund (CPF)

PRS and CPF – Snapshot :

The SC will regulate the following key participants in the PRS industry – the PRS Administrator (the Private Pension Administrator or PPA; visit www.ppa.my), PRS Providers (the selected 8), the Schemes (the funds), Trustee to PRS (Scheme Trustee) and the Trustee to Employer­Sponsored Retirement Schemes (Employer Trustee).

The formation of the PRS Administrator, namely the Private Pension Administrator or PPA (http://www.ppa.my) serves as an administrative centre. It does not accept contribution from PRS into PPA.

As announced in Budget 2012 – tax relief up to RM3,000 per annum will be given for an individual’s contribution to the PRS; and Employers will also be given tax deduction on contributions to PRS made on behalf of their employees of up to 19% of the employees’ remuneration.

Download PRS Booklet (from Securities Commission)

An Individual may participate in several PRS, simultaneously as they wish. As contributions are voluntary, no fixed amounts or fixed intervals are specified. The PRS Providers may set the minimum contribution as well switching policy [switching between funds can be used as tactical allocation strategy]. The contribution will be divided into 2 sub-accounts – A holds 70% and B holds 30%. Amounts are to be invested until mandatory retirement age but the sub-account B withdrawal is allowed once a calendar year at payment of penalty of 8% on the withdrawal amount. Withdrawal at mandatory retirement age, withdrawal due to death or permanent departure from Malaysia, are tax free.

So why must we contribute to PRS ?

  • For individual under employment – PRS is a supplement to retirement savings such as E*F or Compulsory Provident Fund (CPF).
  • For individual who are self-employed – PRS offers creation of retirement fund
  • PRS can potentially generate higher Returns, as there are options to placed contributions in funds with higher equity proportions. Unlike CPF which is meant to be conservative and invest largely in bonds and Sukuk [CPF average returns 6% per annum]. As PRS are similar to Unit Trust Funds, perhaps the returns can average 12% or better per annum depending on type of Funds.
  • PRS allow choice between Growth Funds (equity max 70%), Moderate Funds (Equity max 60%) and Conservative Funds (Equity max 20%) and more.
  • PRS offers choice of Syariah funds.
  • Tax relief of RM3,000 per year for individual contributor. And tax exemption of up to 19% employee’s salary for employers.

So, whatcha gonna do ? Wake up Malaysia ! Time to be responsible for our own retirement. Only those who choose to be responsible, can be rich, be financially free and achieve happiness in life.

Jaslinah Abdul Rahman

About Jaslinah Abdul Rahman

I am Jaslinah Abdul Rahman, Group Agency Manager of JUST Consultants. I’ve been in the Unit Trust business as a Consultant & Entrepreneur since 2003. And presently leads a team of Unit Trust Consultants with expertise in Islamic Wealth Management via Just, Unique, Street-smart & savvy and Trustworthy services. We believe in Hi-tech & Hi-touch approaches. Call 017-3104171 or 012-2037003 if you're interested to join our team or to engage our services.

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