Private Retirement Scheme Roadshow – Key Takeaway Part 1

I was at the Private Retirement Scheme (PRS) Roadshow & Seminar 2012 as special guest  on 12 October at Penang. It is an event organized by Money Compass, one of the premier wealth magazine in Malaysia. Why was I there? Well, because I am currently a columnist on REIT investment for English Money Compass – click here if you missed my previous post.

There’s a lot to digest from this whole day event. However, this is an overall great event which brings together the industry participants and certainly achieved its aim in raising public awareness on retirement planning.  What  you will NOT get from this event is how to plan for your retirement finance. Anyway, I aim to keep part one of this post short and sweet, (in point forms, in no particular order) – so you might want to post questions below, which I would answer in part 2.

My wife, me and Amy Seok, Money Compass Principal Consultant

It is not a political agenda

That’s what the speakers think, and I kind of agree. People are generally concerned about the scheme is just another 1Malaysia gimmick, but with the framework is nearing completion to be launched by end 2012, PRS is here to stay, no matter what happen in the coming general election at the time of this writing.

New license as PRS consultant

You need new license to be one. Yes, having a CUTA license does not qualify you to be a PRS consultant.

Is this safe? Or another scheme to take money from rakyat and channel into ahem, “1-Malaysia nation-building” initiatives?

It is highly regulated by Securities Commision, the body that regulates Bursa. SC regulates PRS distributors/consultants, PPA, PRS providers and their schemes, and lastly the schemes’ trustees. See the diagram below from SC PRS booklet.

What PPA?

Private Pension Administrator. It serves as one-stop integrated system to keep track of members’ PRS contributions from all PRS providers. It will NOT manage the funds internally or accept contributions but will facilitate instructions/contribution from members.

What PRS providers?

Fund or insurance companies. There are 8 approved so far – AmInvest, AIA, CIMB Principal Asset Mgmt, Hwang Investment, ING, Manulife, Public Mutual and RHB.

What PRS Scheme?

Each PRS provider provides 3 types of fund – growth,moderate and conservative fund.  Each has their own investment mandate, so to speak.

What scheme trustee?

Independent body to ensure proper functioning of PRS industry and protect members, via prudential and investor protection requirements.

What kind of return we are looking at?

We don’t know, since no track record. But representatives from PRS providers of course promote their best or award winning funds to showcase their track record of generating high returns.

Any guaranteed minimum return?

No. Seriously? Yes. No kidding. EPF is obliged by law to give you minimum 2.5 percent dividend, in case you didn’t know that already. Not for PRS.

Why industry expert think PRS is the way to go?

Long story short – government is on the move to privatize a lot of things. Pension/retirement fund is one of it, emulating how this is being conducted in developed nations like Hong Kong/Canada. This is so to lessen the burden on the government in managing this (anyone can explain this better?).

When PRS scheme matures, it is foreseen that mandatory withdrawal would likely a MUST for EPF lump sum more than RM 1 million, or they can just make a new ruling to say that else, you would only get 2.5 percent only. This will essentially force you to withdraw and put your money somewhere, say, in PRS.

What are the details of this scheme?

PRS provider all now in the stage of “tunggu dan lihat”. No one wants to be the first to launch their scheme, hence revealing all their features and allowing competitors to beat them in terms of feature and entry cost (lower the better of course for us), which is capped at maximum 3 percent.

Stay tuned for Part 2 – for more questions you might have if you are a financial advisor, company management or employer like you and me.