Malaysians In This Age Bracket Are Entitled To A RM1,000 Incentive If They Invest In PRS

The incentive was increased from RM500 to RM1000 during the tabling of Budget 2017.

Cover image via Reuters

The government is giving out a RM1,000 incentive to all young Malaysians who want to start saving early for retirement

Image via Najib Razak

To encourage young Malaysians to start voluntary retirement savings at an early age, the government introduced the 'PRS Youth Incentive' programme during the tabling of Budget 2014.

This programme was introduced to reward young people with RM500 if they contribute to a PRS (Private Retirement Scheme).

Prime Minister Datuk Seri Najib Tun Razak announced last year during Budget 2017 that the incentive amount has increased from RM500 to RM1,000.

The is a one-off incentive where qualified individuals will only receive it ONCE for the entire program between 2014 to 2018 and not once every year.

What is PRS?

To put it simply, PRS is like your Employees Provident Fund (EPF) or KWSP in its Malay abbreviation. The most important difference here is that PRS is a voluntary contribution unlike the EPF which is mandatory.

Individuals are free to invest any amount, whenever they please but restrictions are put into place for withdrawal as with any retirement schemes.

Essentially, both are long-term investment schemes but the PRS is a privately owned and managed by financial or wealth institutions with no guaranteed returns, as opposed to Employment Provision Funds (EPF) which are wholly owned by the government with a guaranteed minimum dividend rate of 2.5% per year.

Ultimately, the function of both PRS and EPF is the same - to help people build up their retirement income.

Image via Shutterstock

Who are the PRS Providers?

There are currently eight PRS Providers who are approved by the Securities Commission (SC) Malaysia to provide and manage private retirement schemes.

They are:
1. Affin Hwang Asset Management Berhad
2. AIA Pension and Asset Management Sdn Bhd
3. AmFunds Management Berhad
4. CIMB-Principal Asset management Berhad
5. Kenanga Investors Berhad
6. Manulife Asset Management Services Berhad
7. Public Mutual Berhad
8. RHB Asset Management Sdn Bhd

According to SC, these Providers were selected on the basis of their expertise in investment or pension fund management, experience in global pensions management, financial strength, governance structure and proposed business model.

More information on these PRS providers can be found on the Private Pension Administration (PPA) Malaysia website.

So, who is eligible for the RM1,000 PRS Youth Incentive?

Image via IBanding
1. PRS Youth Incentive is only for Malaysians.

2. Individuals may be existing Private Pension Administrator (PPA) account holders or new members.

3. Individuals must be aged between 20 and above but have not reached the age of 31 between 2017 - 2018.

4. Gross contributions must reach a minimum of RM1,000 during a period of two years from the period beginning 1 January 2017 to 31 December 2018.

5. Contributions must be in a single PRS fund of a Provider. This means that if you have two funds and contribute RM500 each, you are still not eligible.

6. Contributions may be in a lump sum or staggered basis.

Unfortunately, those who have previously received the RM500 PRS Youth Incentive during the period of 2014 to 2016 will not be eligible to receive the RM1,000 PRS Youth Incentive.

This incentive will be deposited into every eligible individual's account automatically

Eligible candidates need not apply for the incentive as the government will automatically credit the RM1,000 incentive directly into their PRS fund.

PPA Malaysia will monitor the eligible accounts and compile a listing of those qualified and notify the government of the individuals eligible for the incentive.

Payment is made bi-annually after PPA submits their report, which is usually at the end of June and December.

Image via Reuters

But I'm still young, why should I start investing in PRS now?

Last August, Bank Negara Malaysia (BNM) revealed that 92% of Malaysians worry about their financial health and needs at old age. It was said that only 40% of Malaysians say they are ready for retirement.

As with any other investment schemes, there are always pros and cons. PRS is just one of the investment tools for you to consider if you are thinking of growing your retirement wealth.

The Malaysian government believes that PRS is a good starting point, thus initiating this programme to encourage young people to start saving for retirement now.

How do I apply for PRS?

1. Choose your PRS Provider from the eight entities listed above.

2. Open a PRS and PPA account through your selected PRS Provider. This can be usually done at the PRS Provider's offices or branches.

3. Choose a suitable fund to invest in.

4. Top up your funds regularly via PRS Online. You may also view and monitor the latest fund prices, PRS contribution details and account summary of your PRS investments.

If you are interested and want to get that RM1,000 incentive, find out more about PRS and the incentive programme on the Private Pension Administration (PPA) Malaysia website.

Do you think the PRS Youth Incentive programme is a good initiative to encourage young people to start planning for retirement now? Let us know your thoughts in the comment section below

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