This post is specifically for Malaysian - our PM launched a new voluntary private retirement scheme (i.e. PRS) for all Malaysian! You can check the announcement here. Well, I think this a good news. So, let's see what are my key takeaways from this announcement?
- You may ask what is the difference as compared to EPF? The obvious one, EPF is mandatory and PRS is voluntary.
- Tax relief is up to RM 3K as compared to EPF is RM 6K. Well, it is additional. What it means is if your tax bracket is 26%, you will able to save up to RM780
- Contribution frequency is flexible where else for EPF is monthly. I think this is very similar to mutual fund investment where you can also setup a monthly investment if you want to.
- You can only apply this PRS through approved PRS providers. They are 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 Fund and RHB Investment Management Sdn Bhd.
- You can choose what funds to invest but I guess that is still based on the term and conditions of the PRS providers above. You should check with your agents. For EPF, you only have partial freedom. Remember you can opt for withdraw the money from EPF for investing in mutual funds?
- Withdrawal is similar to EPF, the entire fund in your PRS can be withdrawn when you reach your retirement age (55 years old - used to be 60), you die or you migrate to another country. For partial withdrawal for per-retirement, there will be 8% tax penalty. This is different from EPF where withdrawals can be made without penalty for specific purpose (e.g. pay for housing loan and education). Anyway, for detail you should check with your PRS provider to confirm.
I believe the details on how to apply this PRS will be communicated by the PRS providers soon. For example, if you're using Public Mutual and I will expecting your agent will be contacting you about this scheme. If not, you can approach them assuming you're interested to apply.
I think I will go for this as it can help me on the tax relief. Will you? One risk that you must understand is the fund that you invest in may be losing money. To minimize such risk, I think the PRS providers will mostly offer those low risk funds rather than aggressive funds. So overall, I think this is safe to invest.