According to an AIF report, millennial’s appetite for saving grows with age, with the highest proportion of savers being in their late 20s to early 30s. If you fall under this age bracket, you should seriously consider investing in the Private Retirement Scheme (PRS) in addition to EPF.
With increasing cost of living and life expectancy, it’s better for you to start planning and saving for your retirement as soon as possible to ensure a comfortable life later. Plus, your retirement savings fund gets those extra years to grow further when you start early.
Now you might be thinking, “Why should I invest in PRS when I already have an EPF account?” The reason is that the PRS fund will serve as a nice extra cushion once you’ve reached the age of 55. It is designed to complement the EPF. And unlike EPF, your contribution to PRS is voluntary, and you can contribute as low as RM50 per fund.
If you are self-employed, PRS could also help in building up your savings. You can choose to invest based on your risk appetite and retirement goals and needs. What’s better is that if you’re 30 and under, you might be able to receive an incentive when you open an account.
Here are 5 intelligent reasons why millennials should invest in PRS.
1. Youth Incentive and Enrolment Treats
The TN50 PRS Youth Incentive (or better known as the PRS Youth Incentive) is an initiative by the Malaysian government launched under the Budget 2014, which aims to encourage youths to start saving for their future.
To help kick-start your retirement savings, the government will give a one-off incentive of RM1,000 if your contribution is at least RM1,000 in a single PRS fund during a two-year period.
To qualify for the Youth Incentive, you need to be a Malaysian national aged between 20-30 years old within the incentive period (2017-2018).
If you don’t have a PRS account, open one soon as the incentive offer ends on 31 December 2018. There’s no need to apply for the incentive as it will be credited automatically to your account if you’re eligible for it.
Similarly, there’s also a special PRS offer going on at the moment. The PRS Online Enrolment Treats, which is available from 2 April to 30 September 2018, gives new enrollees an RM100 treat.
If you’re the lucky 20th enrollee (winners are chosen on a weekly basis until the offer ends), you’ll receive RM100 in PRS units.
To receive the treats, you can enrol via PRS Online.
2. Zero or minimal sales charges
To give you the lowest investment costs on your retirement savings, PRS funds typically have zero or minimal sales charges applied. Sales charges may vary between PRS providers. Check out the PRS fee comparison table for further details.
For the new PRS subscribers aged 30 years and below, there will be zero sales charges with selected PRS providers when they sign up via PRS Online, according to an NST report.
These are the PRS providers approved by the Securities Commission Malaysia:
- RHB Asset Management Sdn. Bhd.
- Public Mutual Berhad
- Manulife Asset Management Services Berhad
- Kenanga Investors Berhad
- CIMB-Principal Asset Management Berhad
- AmFunds Management Berhad
- AIA Pension and Asset Management Sdn. Bhd.
- Affin Hwang Asset Management Berhad
There may be other fees and charges involved, for example, annual management fee and transaction fees (e.g. transfer fee, switching fee).
3. Small contribution amount
Most millennials are still working hard towards financial stability, so not many are able to make a large contribution towards their savings, be it for emergencies, retirement or others.
This is evident in the AIF report, which shows that the majority of millennials in Malaysia spend a large amount of their income to cover their living expenses, followed by loan repayment.
When it comes to PRS contribution, the minimum contribution varies from provider to provider. Generally speaking, you may be able to contribute a minimum of 10% of your monthly salary.
For example, the minimum initial contribution is RM100 and minimum subsequent contribution is RM50 per fund. You can check the actual amount with the provider of your choice.
Such low contributions won’t burden you financially, and you’ll be able to build a solid retirement fund to secure your golden years.
4. Contribution flexibility
Unlike EPF where you’re required to make a monthly contribution for a fixed amount, there’s no fixed frequency when it comes to making PRS contributions. You can choose to contribute to the PRS as often as you like.
However, you’re encouraged to make regular monthly contributions in order to achieve your retirement goals.
5. Tax Relief
The PRS Tax Relief allows you to claim tax relief of up to RM3,000 annually. This tax incentive is available until 2021. The following table shows how much you’re able to save on tax:
|Personal Taxable Income (RM)||Tax Bracket (%)||Tax Savings (RM)|
|20,001 – 35,000||5||150|
|35,001 – 50,000||10||300|
|50,001 – 70,000||16||480|
|70,001 – 100,000||21||630|
|100,001 – 150,000||24||720|
|150,001 – 250,000||24||720|
|250,001 – 400,000||24.5||735|
|400,001 – 600,000||25||750|
|600,001 – 1,000,000||26||780|
Source: PPA e-Learning
While you have to wait until the age of 55 to withdraw from your PRS funds, pre-retirement withdrawals are allowed under the following circumstances:
- Death of the member (full withdrawals)
- Full withdrawals in the event of permanent total disablement (PTD), serious disease (SD), and mental disability (MD)
- Partial or full withdrawals from sub-account B
- Permanent departure of the member from Malaysia (full withdrawals)
Please note that there may be tax penalty involved for pre-retirement withdrawals.
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