How to get your PRS Tax Relief statement from PPA ? (April 2013)

In conjunction with the NEW tax relief available from YA2012, many Private Retirement Scheme (PRS) contributors are wondering how can they get the tax statement for income tax filling. To address your concern, here you go... (If you don't know what are we talking about, please find out "What is Private Retirement Scheme?")

To recap, contributions into a PRS scheme can enjoy a tax relief of up to RM3,000 from YA2012 - YA2021. If you did contribute some money into a PRS scheme in 2012, congratulations, you're entitled for PRS tax relief for YA2012. If you haven't, no worry, you still got time to start contributing before end of this year.

Back to the topic, please follow these few easy steps to get it:

Please surf www.ppa.my and click log in. I believe you already get your PIN from PPA when you made your first contribution. If not, please contact PPA and request again.

After log in, you will arrive at the following page. Supposedly, you can download the tax relief statement by clicking "Tax Relief".

However, you will be notified by this message.

Oppsss... What if I didn't keep the receipt or letter given by providers? No worry. Alternatively, you can download the "Consolidated Statement" as a proof and for income tax filling purpose. Hope this could clear your doubts. Happy income tax filing. Thanks.

Finance Malaysia would like to thank Alex Yeoh for his input in this article. Alex is a Licensed Financial Planner with VKA Wealth Planners, whom can advise and distribute multiple PRS products. You may contact him via email alexyeoh@vka.com.my

3 Different Types of PRS Distributors

Finance Malaysia believes that after a series of publicity and roadshow by various parties, especially PPA and PRS providers, you should know what is Private Retirement Scheme (PRS) is all about. Since then, we received many inquiries on whom should potential contributor consult with and why?

It brings us to this topic, and hopefully by understanding the different types of PRS distributors, investors could make their decision confidently. There is no right or wrong. It's down to your own preferences and of course, the trust level you have on a PRS consultant. So, who are they?

1. PRS consultant
   This is the most common practice in town, whereby a PRS consultant representing one PRS provider. So, in this case, he/she can only distribute PRS from one company.
   
   
2. Institutional PRS adviser
   Basically, they are bankers whom also licensed to distribute PRS schemes made available by respective banks. Bankers may distribute schemes from more than one PRS providers.
   
   
3. Corporate PRS adviser
   Currently, only financial planning firms holding this kind of licensed, whereby they can represent and distribute products from more than one PRS providers. They are individual acting on behalf of clients to source for the most suitable schemes for contributors.

Please take note also that not all unit trust consultants can distribute PRS. ONLY those already get their PRS license can distribute. Under the guideline, he/she may represent a PRS provider, which differ from his/her existing unit trust company. Example, a Public Mutual unit trust consultant can holds a PRS consultant license by Manulife. In this case, he/she can ONLY distribute Manulife PRS to clients.

According to Alex Yeoh (email: alexyeoh@vka.com.my), a licensed financial planner with a corporate PRS adviser, thinks that each channel has its own advantages. In the end, clients would choose the one, who can give them the best service they want.

Finance Malaysia hopes the above info is useful for you to make informed decision. We believe service of adviser/consultant plays an important role in PRS distribution. However, if you intended to have different PRS funds from different PRS providers, it would be advisable to seek help from a corporate PRS adviser. It's more convenient, simple and effective. Thank you.

Is it SAFE to Invest in Private Retirement Scheme (PRS) ?

This is one of the common question asked by potential PRS contributors. First, I want to emphasis that PRS is a long-term investment for the purpose of retirement planning. In investment case, long-term means you already using the most powerful method to reap a good return. Anyway, many contributors still want to treat PRS as some kind of short-term investment. I got the answer for you.

Basically, PRS is very similar to unit trust investment. The underlying structure and investment philosophy were the same actually. No wonder many people perceived PRS is another unit trust scheme. Yes, you're correct to a certain extent.

Under the guidelines, each PRS providers must at least launched their core funds for investors to select, namely Growth, Moderate and Conservative. To make things simple, we only discussed these core funds because I believe most of us only invest in core funds. From these core funds, growth fund is the most aggressive one. In other words, the most risky one, with the aim of getting better return than the other two.

Asset Allocation of Core Funds under the guideline by Securities Commission of Malaysia

Is it really so risky?

Let's us examine even deeper now. Again, under the guideline for PRS growth fund, only maximum of 70% of NAV can be allocated to equities, while the balance was in fixed income/money market instruments. If you're an unit trust investor, you will know that this is almost like a balance fund type of asset allocation. For your information, for normal unit trust equity fund, equities exposure was between 70% - 98%. Meaning, the maximum equities exposure for PRS Growth fund equals to the minimum of an equity fund. Not so risky, right?

Of course, if you want higher equity exposure for your PRS portfolio, you can opt for those non-core funds, which can go as high as 98% in equity exposure. Then, the next question was "Is it risky to invest now?"...

It all depends on your perception. If you think that Malaysia market is too expensive now, you may opt for those funds with foreign exposure. Currently, from the 4 PRS providers whom already launched their schemes, some can invest into foreign countries. Some are fund-of-funds, some are foreign funds. Coming soon, more variety of PRS funds will be offered, such as property fund, commodities fund...

This is a guest post by Alex Yeoh in the series of Private Retirement Scheme. For more PRS info, you may contact Alex Yeoh (email: alexyeoh@vka.com.my), a licensed financial planner, whom representing multiple PRS providers. Thank you.

What are the TAX benefits from Private Retirement Scheme (PRS)?

According to Securities Commission of Malaysia, tax incentives are provided to both employers and individuals for the first 10 years from assessment year 2012; in addition to the tax deduction permitted for EPF contributions:

Amount of Tax Savings by individuals for PRS contributions

For Individual:

Tax relief of up to RM3,000 per year will be given for contributions made within that year. This is on top of existing tax relief already enjoyed by taxpayers. How much can you save from tax? Let's look at the table above which illustrates the amount of tax saving an individual get after personal tax relief and RM6,000 EPF + Life Insurance tax relief. Assuming maximum RM3,000 PRS relief, the amount of tax saving depends on your level of income. For high tax bracket individual, you can save up to RM780 annually!!!

For Employer:

Tax deduction on contributions to PRS made on behalf of their employees above the statutory rate of up to 19% of employees' remuneration was granted. Example, if an employer already making 12% EPF contributions to his employees, the employer may choose to reward their employees by contributing into employees PRS account for up to another 7%.

Vesting Schedule to Retain Employees?

Yes, employer can use PRS as a tool to retain employees by adding a "vesting schedule" clause. Currently, there are a few available vesting methods: by length of service, job rank, or by age. Unlike EPF, if an employee leaves before vesting, the employer can access to the un-vested portion of contribution already made. Likewise, for EPF, employee take the full amount when they left. With PRS vesting schedule, employee may think twice before switching jobs.

In conclusion, there are tax incentives for every tax payer, employee or employer. Ultimately, enough retirement funds was the key objective of PRS. On top of that, a tax exemption is also provided on income received by the funds under the PRS.

This is a guest post by Alex Yeoh in the series of Private Retirement Scheme. For more PRS info, you may contact Alex Yeoh (alexyeoh@vka.com.my), a licensed financial planner, whom can distributes products from multiple PRS providers. Thank you.

How Private Retirement Scheme (PRS) works actually?

Many people are still in the dark on how actually Private Retirement Scheme (PRS) works. In order to clear everyone's mind, we hope this post was timely for those who may want to entitle for extra tax relief of up to RM 3,000 given by PRS before 31st December 2012. To further explain the whole scheme, Finance Malaysia Blog was glad that Alex Yeoh, a licensed financial planner is able to share with us on this matter.

By Alex Yeoh,

First we must know that PRS is a voluntary scheme for the purpose of retirement saving. For ease of understanding, let us look at the picture above which explain the process into two parts. Initially, contributions were made by us into the PRS fund that we select. It was as flexible as  normal unit trust investments (shown in upper part). Contribute anytime any amount as you like, without any specific intervals. As simple as that.

When can I withdraw the money?

Each time, your contributions were split and maintained in sub-accounts A and B similar to EPF way (shown in lower part). 70% of contributions will go to Account A, which can be withdrawn upon reaching retirement age, which is currently at 55.

Meanwhile, the balance 30% into Account B, which can be withdrawn after one year, subject to 8% tax penalty. Take note that you can withdrawn from Account B for whatever reason. Although lump sum withdrawal are permitted, contributors are encouraged to retain their savings for continuous investment under the respective schemes.

Why 8% tax penalty?

The said 8% tax penalty was to discourage contributors to withdrawn their money prior to retirement age. We must understand that PRS is meant for retirement savings. Moreover, the 8% tax penalty was deducted from withdrawal amount to pay back Inland Revenue Board (IRB). Why? Because IRB is the one who gave you tax relief on contributions made initially. Otherwise, loop-hole was existed with everyone just want to take advantage of the tax relief and  withdrawn their money after that. Agree?

For more PRS info, you may contact Alex Yeoh (email: alexyeoh@vka.com.my), a licensed financial planner, whom can distributes products from multiple PRS providers. Thank you.

Do you understand the PRS Framework and its Lingo?

Before jumping into the bandwagon of private retirement schemes (PRS), we should understand the PRS framework first. What is the structure behind the scene? Does our invested money in safe hands? Who are the regulators? These were the few typical questions we should find out. No worries, all of these will be answered here... (yeah, give us a "Like")

• Manufacturer?
  PRS are offered by approved PRS Providers. Each PRS will include a range of retirement funds from which individuals may choose to invest in, based on their own retirement needs, goals and risk appetite.
  
• Book-keeper?
  The PPA functions as a record keeping and resource centre for data on all transactions performed by contributors. It will facilitate transactions and promote efficient administration. The PPA will also act as a resource centre for data and research relating to the PRS industry in Malaysia.
  
• Safe-keeper?
  The assets of each PRS will be segregated from the PRS provider and held by an independent Scheme Trustee under a trust. Yes. It must be "independent" to safeguard investors money.
  
• Regulator...
  All of the above mentioned parties, namely the PRS providers, the PPA, the Scheme Trustees and distributors of PRS were being regulated and supervised by Securities Commission (SC). This was to ensure the proper functioning of the PRS industry and protects members, via prudential and investor protection requirements.

After all, still blur about the term used above? No worries. Finance Malaysia Blog take the initiative to explain the PRS lingo against that of Unit Trust for ease of understanding:

For more PRS info, you may contact Alex Yeoh (alexyeoh@vka.com.my), a licensed financial planner who can distributes products from multiple PRS providers. Thank you.

What is Private Retirement Schemes (PRS) ?

Are you ready for your retirement life? If not, what and how are you going to do before it is too late? These are a few critical questions Malaysians should ask ourselves without further procrastination. With increasing life expectancy and rising living standards, many Malaysians find that their savings are inadequate to meet their retirement needs.

Private Retirement Schemes (PRS) form an integral feature of the private pension industry with he objective of improving living standards for Malaysians at retirement through additional savings of funds. As long-term investment vehicles, PRS are designed to help enhance adequacy and expand coverage of retirement benefits to all segments of the population. It complements Malaysia's mandatory retirement savings scheme - EPF.

Voluntary?

Yes. It's totally up to YOU to contribute voluntary anytime. Who can participate? Anyone, be it individuals (retail investors, self-employed and employees) or employers. Offering private pension benefits could be a tool for employers to attract and retain skilled talents. We will discuss this in detail later.

Who are PRS Providers?

As of 1st June 2013, there are a total of 8 PRS providers approved by Securities Commission as below:

• AmInvestment Management
• AIA Bhd
• CIMB-Principal Asset Management
• Hwang Investment Management
• ING Funds Bhd Kenanga Investors Bhd
• Manulife Asset Management Services
• Public Mutual
• RHB Investment Management

Stay tune for more info about PRS...

For more PRS info, you may contact Alex Yeoh (email: alexyeoh@vka.com.my), a licensed financial planner whom representing multiple PRS providers. Thank you.