The discussion is not a popular issue among today’s young people. It is very difficult to plan for the next 5 years, let alone for the next 50 years, but the fact is, according to the Employees Provident Fund (EPF), pensioners use an average of RM 150,000 in EPF savings in 3-5 years of their first retirement. If you are confident that you can have millions of dollars at the age of 60, it is a good idea to look for alternatives to save on your EPF savings. In this article, we will look at the Private Retirement Scheme: PRS.
1. PRS Youth Incentives
Citizens between the ages of 20-30 are eligible to receive a one-time payment of RM500 from the government into a PRS account. All you have to do is contribute RM1000 into your PRS account within a year. Very easy. These incentives are only valid until the end of 2018 (or you are 31), so you may need to act fast. It should also be noted that contributions made prior to January 2, 2014, are not considered in this incentive.
2. Flexible Investment Options
One of the advantages is the flexibility to meet multiple risk levels. PRS allows investors to invest funds in line with the accepted risk level. For investors who need a shariah investment, there are various Islamic investments with the right risks. This makes PRS very affordable, you have the time to invest, the amount to contribute and you can invest in multiple funds at the same time.
3. Save on Taxes
Another attractive offer from PRS is tax exemptions of up to RM 3000 per year for the first 10 years, plus tax exemptions for the EPF. For example, if you fall into the 26% tax category and contribute RM 3000 or more, you will get a maximum tax exemption of RM 3000 and a tax savings of RM 780 (26% off RM 3000). Your income from PRS is also tax exempt. Employers who contribute to employees also receive tax exemptions from contributions beyond the rate set by the EPF, up to 19% from contributions.
4. Cash Release From PRS Account
The investment into the PRS account will be divided into 2 sections, namely account A (70%) and account B (30%). The investment will use the total amount in the savings but is divided into 2 parts for production purposes. You can make a withdrawal of up to 55 years of age, migrate abroad or even die. However, you can withdraw funds from your B account before retirement. It should be noted that the tax penalty is 8% based on the amount withdrawn. Unlike the EPF, where account 2 can be withdrawn tax-free. For more information on EPF withdrawal, you can refer here.
5. Disadvantages
Despite the many advantages that PRS offers, there are a few things to keep in mind. When you compare PRS and EPF, where the EPF has a minimum dividend of 2.5%, PRS members may not receive a return or record negative returns if the fund does not make a profit. The EPF will return at least 2.5% even though it does not generate any profit.
For more information about Private Retirement Scheme Malaysia, please visit https://www.vka.com.my/
