Private Retirement Scheme Roadshow – Key Takeaway Part 2

This is the continuation of Private Retirement Scheme Roadshow – Key Takeaway Part 1. Click here if you missed the first part. This part contains in-depth info on PRS at the time of writing, plus some thought-provoking questions/comments from the speakers and myself.

How many fund each PRS provider provides?

Minimum of 3 types of fund – Growth, Moderate and Conservative. See details below

private retirement scheme funds

You get to choose. However, if you do not specify, the default option will be chosen for you catering for different age groups.

Can I switch funds within Private Retirement Scheme?

Yes, anytime. Can switch PRS provider also once a year subject to yet-to-be-determined terms imposed by PRS provider.

Got Account 1 and 2 like EPF?

Oh yes, See this.

PRS PPA accounts

Do I have to commit a fixed regular contributions into my PPA account?

No fixed amount or fixed intervals for contributing to your own PPA account

Got tax incentive?

Sure. RM 3,000 tax relief for individuals – for the first 10 years from YA 2012 onwards

Can withdraw from PPA account before age 55 ?

This is the red flag. You can only withdraw from Account B, once a year. On top of that, for whatever reason, a tax penalty of 8 freaking percent (goes to IRB) of withdrawal amount will be deducted by PRS Providers before balance is credited to member’s account.

A very angry uncle got pretty pissed when he asked this question to the panel of speakers.

This essentially means I got taxed for using my own money? This just seem insensible to me, although the its purpose is to discourage withdrawal. It should have reasons which justify for withdrawals without tax penalty – like EPF (buying house, children education, etc). This is the perhaps the most absurd part of PRS.


By now, you should have this 3 very prudent questions in mind –

1. If you are wearing the hat of an employee – “I already have EPF, why PRS, what is the point?”

2. If you are a PRS consultant, and you are talking to a prospect, expect him to ask – “There’s already EPF, what’s the point of PRS?”

3. Third scenario – You are the financial controller answerable to the company’s board of management, and you want to propose PRS for company staff. Management will question you – “Why are you doing this? We already have EPF, why PRS?”

Even Ng Chze How, Director of Retail Funds at AmInvest don’t have a solid answer, but he only had this to say:

  • If I have a bank account, do I stop opening second bank account?
  • I have one life insurance policy, does that mean I stop buying a second policy?
  • If I already invested in one unit trust fund, does that mean I stop investing in another unit trust fund?

If you have a better answer, let him know so “…he could answer the press better.

My Take

I’d be pretty blunt here – PRS is not for the savvy retail investors, who has the knowledge, time and discipline to manage their own investments, which may give you potentially higher returns, and give you more control. Then again, if you lack of  discipline, you wouldn’t be able to make PRS work for you anyway because the contribution schedule is flexible.

The Missing Puzzle in Retirement Planning

PRS Penang LCFLike EPF, PRS only increases the odds that you having (hopefully) enough retirement funds at the point when you start to retire to last you till the day you die . For many people, the lump sum withdrawal at age 55 will send a surge of euphoria in you that you are now filthy rich.  You feel it is the time to reward yourself – blow it on that dream super car or vacation you have been longing for so long. Until, reality strikes a few years after that and you realize you spend too much on unnecessary stuff. Years of saving up your retirement fund now amounts to nothing because you didn’t re-invest most of the retirement nest egg. All your pre-retirement effort would be in vain now –  it just dawned upon you still need to live for 20 or more years, and inflation is always there to haunt all of us!


Now you know why you might be part of the statistics below (source: Money Compass)

The government has been concerned about the inadequacy of EPF savings as statistics show that 50% of contributors exhaust all of their EPF savings within five years of retirement and only 18% of active members aged 54 have adequate savings of at least RM173,000. It is also estimated that about 70% of retirees use up their EPF lump-sum withdrawals within 10 years of retirement.

Retirement is about stop working for many people but here’s the probable new definition:

Retirement is about the security of having enough money, constantly reinvested, to sustain your lifestyle & achieve life goals, whether you choose to work or not.

12 thoughts on “Private Retirement Scheme Roadshow – Key Takeaway Part 2”

  1. Speaking about PRS, here’s a 3 part article I wrote about PRS in my blog. Hope to share them with the readers.

    Part 1 : Private Retirement Scheme (PRS), What’s In Store For Investors?

    Part 2 : Private Retirement Scheme (PRS), What Is The Expected Performance?

    Part 3 : Private Retirement Scheme (PRS), Enjoying The Benefits of Tax Relief

  2. KUALA LUMPUR: Hwang Investment Management Bhd (HwangIM),
    one of Malaysia’s leading investment management houses, today rolled out Malaysia’s first private retirement scheme (PRS).

    Known as Hwang PRS Solutions, the scheme comprised four PRS funds, making it the first of eight appointed PRS providers to launch its products and services.

    The four funds are Hwang PRS Growth fund, Moderate Fund, Conservative Fund and Hwang AIIMAN PRS Shariah Growth Fund.

    The Hwang PRS Solutions funds, which are offered under Malaysia’s first voluntary retirement investment scheme, will provide contributors a layer of customisation depending on their objectives, needs and risk appetites.

    The funds are open to all Malaysians and foreigners above 18 years of age as well as to companies looking to add to their employees’ existing retirement contributions or in the form of staff retention programmes.

    “We are pleased to be the first to roll out our PRS solutions. We believe HwangIM is also the first provider to offer the investing public low-cost PRS solutions that feature 0 per cent front-end fees across all fund offerings,” said HwangIM chief executive officer and executive director, Teng Chee Wai.

    “Our view is that retirement investing should be simple and low-cost, without the high initial fees usually associated with unit trust investing,” he said.

    “It should be simple in the sense that the funds structured are based on straightforward and proven funds such as our own in-house managed Select Series.

    “We know that we are the first to market and are looking forward to setting the bar high,” he said in a statement today.

    He said apart from the benefits of being low-cost and the option to switch funds according to age and risk appetites, these funds were meant to allow contributors to opt for a more aggressive portfolio in building their retirement funds.

    “In addition to potentially higher returns, our conservative and moderate funds will offer semi-annual distributions whilst the growth funds aim to offer annual distributions,” he added.

    HwangIM has set the initial investment sum at an affordable RM100 for each fund, and subsequent top-ups at a minimum of RM50.

    The company will introduce more funds in the future until the maximum number of funds allocated under PRS is reached. — BERNAMA

    1. Thanks TY.
      Zero upfront fees, now that is something to beat! Hwang DBS had just taken it to a whole new level. I wonder what is the back end fess then.

  3. at the moment, the only definite plus point for this PRS scheme is the RM3k tax relief. everything else is hazy & dubious?

    1. Hazy yes, dubious – err, I won’t put it that way as the details are yet to be revealed. The only dubious thing is the 8% withdrawal penalty, hopefully that will be removed soon.

  4. Hi LCF,
    Thanks for your informative details on PRS. It was stated that rm3k tax relief starting YA2012. When we can start buying? Time is running out another 9weeks to go to year end. Please advice. Regards.

    1. The framework is there but PRS provider do not want to be the first to launch. Everyone is waiting for everyone. An audience asked the exact same question like yours, but it goes tactfully “unanswered”. When it is ready to be sold, I am sure it will be all over in the national media so no worries. I don’t have any insider info on this either 🙂

  5. I have a different opinion from Steve. I think PRS is another additional venue for long term retirement.. (if govern correctly).

    Right now, everything is still unclear, especially on the chargers and funds available. With the tax return, it makes it sensible as I am already buying unit trust at 3% service charges via my EPF and I have max out my tax savings on it. Why not the additional RM 3k tax relief? I ultimate goal is to save for retirement with money invested for that precise objective.

    I suspect more people will take up this with more zeal when we see our EPF returns going down in the future.

    1. Hi Susan, yes, using EPF does sound sensible. They should really implement that, I think it’s just a matter of time. It’s a chicken and egg scenario, if EPF dividend does go down to FD rate equivalent, people will be interested in PRS.

  6. Just my take on this – I believe this PRS is a “sucker scheme” as I believe the PRS fund providers will try and sell the unsuspecting public their unprofitable and unpopular funds just to boost their fund size. Caveat emptor prevails.

    1. I learnt a new phrase from you today Steve – Let the Buyer Beware. I got insider news from a financial firm that they would implement a feeder fund for PRS, for its existing funds by PRS provider. Why this is yet to be confirmed, it do sound possible since people are sceptical to invest in funds with zero track record.

      1. Hi LCF,

        The reasons why I am sceptical about this PRS scheme is mainly because if EPF is already doing a good job of earning its members above FD returns and have been doing so for a good many years then why introduce this PRS scheme now? Is it because the EPF has gotten so big that the fund size is unmanageable and they may have difficulty in maintaining their track record in future years? Or is it because they just want to offload the “burden” of risk to their members so that if they don’t do well in subsequent years they can’t be blamed for making shoddy investment decisions and then they can always “persuade” their members to go for the PRS scheme as an alternative. But then again, since the returns from this PRS scheme are not guaranteed and worse still if you do an early withdrawal before age 55 you are slapped with an 8% exit charge which goes to the IRB, what nonsense is this really? That, to my humble opinion, is not fair to the investor. Only the fund houses offering their funds to the PRS scheme benefit from this one sided agreement. Ordinary investors, like myself, who buy unit trusts are not subject to an exit charge if we choose to sell off our unit trusts at any time. So why introduce this clause in the first place? Where is the protection for the investor? Who looks after their interests? Savvy investors will not fall for this con job. Enough said.

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