You may have heard about Private Retirement Scheme or PRS and thought “Do you need to make PRS contributions if you already have EPF?”. For your information, PRS is one of the most effective ways to increase your retirement savings fund. This article will explain the meaning of PRS, the difference between PRS and EPF and the advantages of PRS that you need to know.
Alternative Retirement Savings, What is PRS (Private Retirement Scheme)?
Did you know that most Malaysians do not have enough savings after retirement due to running out of EPF savings? Because of this, some are forced to return to work by doing business to cover their monthly expenses. To avoid the same thing happening to you, consider investing in PRS.
Private Retirement Savings or by other names Private Retirement Scheme (PRS) is a voluntary investment and savings scheme managed by a private company. It is specially designed to help you save more money to add to your retirement savings.
Anyone can make a PRS contribution regardless of whether they are private employees, government employees or self-employed provided the individual is 18 years of age or older. When you make a PRS contribution, you are free to choose a retirement fund because each PRS offers different options.
You can make decisions based on your own retirement needs, goals and risk tolerance. You can start investing with as little as RM100 through the PRS Online service.
PRS vs EPF: The Difference between PRS and EPF That You Need to Know
PRS and EPF have the same goal of providing retirement savings for all contributors. However, there are some notable differences that you should know about.
As mentioned above, PRS is a retirement savings investment scheme managed by a private company while the EPF also functions to provide savings for your retirement but all matters are managed by the government. Here is a comparison between PRS and EPF:
|Eligibility||Open to Malaysian citizens and non-Malaysian citizens||Open to Malaysian citizens and non-Malaysian citizens|
|Contribution||Made voluntarily||Mandatory for Malaysians working in the private sector;
Made voluntary for those who are not Malaysian citizens.
|Selection and Number of Funds||Contributors are free to choose funds according to the type of risk they are willing to take;
The number of contribution funds is one or more.
|Contributors cannot choose funds;
The number of donation funds is only one.
|Payment Limits||Consult the PRS provider regarding the minimum amount as each provider has different limits||Minimum: RM50
|Dividend||There are no guarantees||Minimum dividend guarantee of 2.5 percent|
|Minimum Age to Withdraw||55 years old||55 years old|
|Tax||8 percent is charged to withdraw money before retirement||No tax is charged|
|Tax Relief||RM3,000||RM6,000 (with mandatory contribution)|
|Risk||No guaranteed dividend||Employer might not pay your contribution|
5 Advantages of Investing in PRS for a Better Future
Even though you may be young or have just started a job, you are advised to start saving for retirement. PRS is one of the best investment schemes that you should try. Here are five advantages of investing in PRS:
1. Tax Relief
When you make a PRS contribution, you are allowed to claim tax relief of up to RM3,000 by the IRB (Malaysian Inland Revenue Board).
2. Various Provider Company Choices
You are free to choose any PRS provider according to the package you want. Private Retirement Schemes are offered by PRS Providers approved by the Securities Commission of Malaysia.
8 PRS Provider Companies in Malaysia
Here are the eight PRS providers approved by the Malaysian Securities Commission:
- Affin Hwang Asset Management Berhad
- AIA Pension and Asset Management Sdn. Bhd.
- AmFunds Management Berhad
- Kenanga Investors Berhad
- Manulife Investment Management (M) Berhad
- Public Mutual Berhad
- Principal Asset Management Berhad
- RHB Asset Management Sdn. Bhd.
3. More Flexible Investments
Compared to EPF, PRS is more flexible because you don’t have to contribute a fixed amount every month. You are free to choose the time for you to invest and also the amount of money you want to save. In addition, you are also free to choose the type of fund that is:
Types of Own Funds
Let’s say you want to choose your own fund, you are advised to get the opinion of a licensed PRS advisor first. You must know important information such as knowing the risk and expected return of funds before you start investing.
Types of Funds According to Age
This type of fund is easier when compared to the type of own fund. Age-specific fund types mean that your PRS investment portfolio will change according to your age category. To make it easier to understand, the more conservative the fund, the less investment risk. You can refer to the table below:
|Types of Fund||Age Group||Objective|
|Growth Fund||18 – 44 years old||Develop a portfolio|
|Moderate Fund||45-54 years old||Grow your portfolio while generating returns|
|Conservative Fund||55 years old and above||Generate consistent returns|
4. Withdrawal of Money at Any Time
You can withdraw money in PRS even if you have not reached retirement age for emergency purposes or other purposes such as moving to another country, moving house and so on. However, it should be noted that you will be charged around RM25 for each transaction and there is a possibility that you will be charged a penalty. Therefore, unless you really need to withdraw money from PRS, you are not encouraged to withdraw money from your PRS savings.
5. PRS Online
You can register, top up and check your funds online. There are also various online calculator tools such as retirement calculators and e-learning resources to help you understand how to make the most of your retirement savings.
How to Register PRS
As mentioned above, you only need RM100 to open a PRS account. Basically, the steps to open a PRS account are simple, follow the following steps:
- Choose your PRS provider
- Choose the right fund for you
- Open a PRS account online through PRS Online
- Continue to top up your funds at any time through PRS Online
Make Sure You Have More Than Enough Retirement Savings
It is hoped that the sharing in this article will help you understand the PRS savings scheme in Malaysia. Basically, PRS schemes and EPF savings can help and ensure that you have enough savings to see you through your retirement days peacefully. The earlier you plan, start and invest for retirement, the higher your chances of enjoying a better retirement life. The decision is in your hands, make a wise choice.
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