Private Retirement Scheme (PRS) – When your EPF can no longer sustain you. Is PRS a good investment and when should you start?


It is no secret that the 11% you contribute to EPF for all your working life will not sustain you after you retire. The rising cost of living will only make matters worse as the Ringgit continues to become weaker in the near future. Furthermore, retirement planning has never been a priority among Malaysians, especially the young.

What is so alarming?

The Employees Provident Fund (EPF) has claimed that the money that Malaysians have in their savings will not be enough to last for a long time after they retire from the workforce. In fact, more than 65% of its members have less than RM50,000 in their accounts. Taking into account the standard of living currently, it could barely be enough for 3 years. As such, a lot of Malaysians have since continued working even after 60 in order to continue having an income.

Making up the shortfall

It is hard to calculate how much you need after you retire but the common perception is that you should have at least 50% of your current income (assuming that you have paid off your other loans). While the EPF would have some form of funds, the PRS or Private Retirement Scheme was introduced. Started in 2012, it was a scheme to encourage Malaysians to build an income stream for their retirement on top of their EPF.

Basically, it is a scheme where you contribute voluntarily to build up a fund after you officially leave the workforce. It is very much like your EPF but totally voluntary and not mandatory. You should consider investing in the PRS if:

  • You are not investment-savvy. That means you are not very well-versed with the money markets. So, having a PRS means you put aside a number of funds to have these fund managers manage them.
  • You feel that your EPF is not enough – You might have funds in your EPF but you might have withdrawn some funds for certain purposes like to buy property, education or taken out through aids offered by the government like i-Sinar.  

How does the PRS Work?

In principle, PRS and EPF are quite similar. You can start anytime as early in your working life as possible. It is also divided into 2 accounts namely Sub-Account A and Sub-Account B. Once you enter into this investment scheme:

  • You can only withdraw the amount from your PRS after reaching the age of 55, death or if you are migrating.
  • Withdrawals can only be made from Sub-Account B before the age of retirement and it comes with a penalty of 8%.
  • EPF has a guaranteed annual dividend of at least 2.5% annually. The PRS, being a privately-run entity does not.
  • You can contribute any amount to the PRS.
  • You can claim income tax relief of up to RM3,000 per year.

PRS Providers are mostly associated with a bank or financial institutions like AmInvestment Management, CIMB-Principal Asset Management, Public Mutual Berhad and RHB Asset Management, among others. Each fund manager will have their own set of portfolios to help you get started and your agent will usually advise you on where your investments will go.

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