PRS is a defined contribution pension scheme which allows people (or their employers) to voluntarily contribute into an investment vehicle for the purposes of building up their retirement income.
In a Malaysian retirement framework, it is to be complemented with (and not a substitute for) A PRS is a voluntary long-term investment scheme designed to help individuals accumulate savings for retirement. It complements the mandatory contributions made to EPF.
Members contributing to the PRS scheme will have the choice to select from a range of funds to invest in, based on their own retirement needs, goals and risk appetite.
Individuals or employers (contributing on behalf of employees) can participate as PRS contributors.
Will you be ready for retirement?
With medical advancements and improved living standards, Malaysians are living longer and spending more time in the retirement phase of their lives. Statistics show that the average life expectancy for Malaysians today is about 75 years. With a retirement age of about 55-60 years old, the average Malaysian retiree would need sufficient funding to sustain himself/herself for another 15-20 years.
Some of us may think that we’re ready for retirement because we have savings in the EPF. But, did you know that:
• 14% of EPF members used up their EPF savings within 3 years
• 50% of EPF members used up their EPF savings within 5 years
• 70% of EPF members used up their EPF savings within 10 years
• The active members’ average savings at age 54 is only about RM150,000
The Key Features of PRS
• A long-term investment scheme that offers a range of funds to cater to different risk profiles
• Open to all individuals aged 18 and above, including foreigners, be it employed or self-employed, as a supplement for their retirement savings
• No fixed amounts or fixed intervals for making contributions to PRS, since this is a voluntary scheme
• Option to contribute to more than one fund under a PRS or to contribute to more than one PRS, offered by different PRS Providers.
• A default option is available for those who do not specify a fund option. The default option would cater for different groups. PRS Providers will need to ensure that the relevant members are switched to the Core Funds under the default option in accordance with the relevant age group
• Option to switch funds within a PRS at any time, or change to another PRS Provider once a year subject to terms imposed by the PRS Provider. The first transfer can only be requested one year after making the first contribution to any fund under the Scheme.
• All contributions made to PRS will be split and maintained.
70% in Sub-account A which must not be made available for pre-retirement withdrawal; and 30% in Sub-account B which would be available for pre-retirement withdrawal subject to payment of an 8% tax penalty on the withdrawal sum.
Similarities of PRS with the EPF:
1. Retirement Purpose: Both the EPF and PRS schemes are for building up a person's retirement assets and income.
2. Tax Benefit: Tax relief is given for contributions to both schemes (up to RM6,000 a year for EPF, a separate RM6,000 for PRS)
Unlike the EPF, PRS contributions are not mandatory, and they can be made by either an individual or an employer. There is no statutory minimum amount (although individual PRS Providers may specify a minimum amount as per their own internal investment policy) and no statutory time interval for contributions.