Private retirement schemes: 'Eight is enough'
PRIVATE RETIREMENT SCHEMES: Administrator says it will not give out anymore licences for now
The government for now will not be giving out anymore licences to financial institutions to offer private retirement schemes (PRS). This noticeably leaves out the country's biggest banker, Maybank Group.
"Eight is enough for now. We've got to be fair to these existing players to recover their expenses," said Private Pension Administrator chairman Datin Zaiton Mohd Hassan.
"Out of 29 submissions, we've selected eight. They are a mix of local and foreign players," she said recently.
The PRS is a voluntary initiative set up by the government to complement mandatory contributions made by both employee and employers to the Employees Provident Fund (EPF) scheme.
The Private Pension Administrator, which reports to the Securities Commission, is set up by the government to administer the savings of PRS contributors.
"PRS contributions are not mandatory. They can be made by either the employee or both the employee and employer. Please remember that this voluntary scheme is in addition to the EPF. It's not an alternative," she said.
Employers will also get a tax exemption for contributions for up to 19 per cent of employees' base salary per year.
There is RM3,000 tax relief each year for contributions to the PRS. This is similar to the RM6,000 per year tax deduction granted to EPF contributions.
"Those who pay the highest tax rate of 26 per cent will reduce their taxable income by RM780 if they claim the maximum PRS tax relief of RM3,000 per year," she said.
Similar to the EPF, contributions in the PRS are split into two accounts: 70 per cent in Account A and 30 per cent in Account B. A contributor can withdraw his entire PRS fund upon reaching 55 years old, death or emigration.
The Minimum Retirement Age 2012 Act has now mandated the retirement age for private sector workers to be raised to 60 years old from 55. This means employers cannot force workers to retire before 60 years old. Offenders could be fined up to RM10,000.
Following the extension in retirement age, many questioned if they would have to wait until 60 before being able to withdraw their EPF savings.
EPF responded and confirmed that private sector workers could still withdraw their full EPF savings at 55.
"To be fair to contributors, we're also keeping the PRS fund withdrawal age at 55," said Zaiton.
If, however, a PRS contributor wishes to take out his money from Account B before his 55th birthday, he'll have to pay the Inland Revenue Board an 8 per cent tax penalty.
"The PRS is designed to be a long-term investment. Since the government is granting tax relief of up to RM3,000 per year until 2021 and there is no need for the contributor to justify the early withdrawals, it is only fair to impose an 8 per cent penalty," she said.
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"Eight is enough for now. We've got to be fair to these existing players to recover their expenses," said Private Pension Administrator chairman Datin Zaiton Mohd Hassan.
"Out of 29 submissions, we've selected eight. They are a mix of local and foreign players," she said recently.
The PRS is a voluntary initiative set up by the government to complement mandatory contributions made by both employee and employers to the Employees Provident Fund (EPF) scheme.
"PRS contributions are not mandatory. They can be made by either the employee or both the employee and employer. Please remember that this voluntary scheme is in addition to the EPF. It's not an alternative," she said.
Employers will also get a tax exemption for contributions for up to 19 per cent of employees' base salary per year.
There is RM3,000 tax relief each year for contributions to the PRS. This is similar to the RM6,000 per year tax deduction granted to EPF contributions.
"Those who pay the highest tax rate of 26 per cent will reduce their taxable income by RM780 if they claim the maximum PRS tax relief of RM3,000 per year," she said.
Similar to the EPF, contributions in the PRS are split into two accounts: 70 per cent in Account A and 30 per cent in Account B. A contributor can withdraw his entire PRS fund upon reaching 55 years old, death or emigration.
The Minimum Retirement Age 2012 Act has now mandated the retirement age for private sector workers to be raised to 60 years old from 55. This means employers cannot force workers to retire before 60 years old. Offenders could be fined up to RM10,000.
Following the extension in retirement age, many questioned if they would have to wait until 60 before being able to withdraw their EPF savings.
EPF responded and confirmed that private sector workers could still withdraw their full EPF savings at 55.
"To be fair to contributors, we're also keeping the PRS fund withdrawal age at 55," said Zaiton.
If, however, a PRS contributor wishes to take out his money from Account B before his 55th birthday, he'll have to pay the Inland Revenue Board an 8 per cent tax penalty.
"The PRS is designed to be a long-term investment. Since the government is granting tax relief of up to RM3,000 per year until 2021 and there is no need for the contributor to justify the early withdrawals, it is only fair to impose an 8 per cent penalty," she said.
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