Do I need PRS if I have EPF?

PRS is a type of retirement savings fund, similar to the EPF. PRS is offered by only a few private asset managers regulated by the Securities Commission Malaysia. The central body that oversees PRS is the Private Pension Administrator (PPA), recognised by the Securities Commission and mandated to “protect PRS members’ interests and educate the public”. 

It is open to any Malaysian citizens, Permanent Residents and non-Permanent Residents with work permit aged 18 years old and above. Companies can also contribute to PRS on behalf of their employees. The primary purpose of PRS is to help people save more for retirement, supplementing the EPF.

PRS offers different schemes for varying risk appetites and goals which you can choose from. This is the key difference and advantage of PRS compared to EPF. The default fund option is an age-based allocation, where the prevailing investing strategy is based on the life goals and risk profiles at different life stages. With EPF, you don’t get to choose how you want your money to be invested for growth. EPF members are guaranteed a minimum annual return of 2.5%* (for the Conventional Account). By choosing your PRS fund allocation, you could potentially earn a higher return (with higher risks, of course).

There is no such thing as over-saving for retirement. Many people still wind up with a shortfall in retirement savings with just their EPF savings alone. In fact, more than half of EPF members who are around retirement age do not have enough savings to last their retirement**. Investing in PRS is another way to build up your wealth for retirement that can bring you even higher returns and greater control. You should start saving for retirement as early as possible, to take advantage of compound interest.

Another bonus is that PRS contributions are claimable up to RM3,000 under individual tax relief***. This relief has been extended until the 2025 tax assessment year. That means that for the next five years, you could save yourself RM3,000 annually in taxes paid – that’s an extra RM3,000 that you can channel into more savings or other investments! 

The minimum contribution to PRS varies between providers and there is more flexibility in the frequency and regularity of contributions as compared to EPF. You can start with as low as RM100****. You can also contribute to more than one PRS fund. Having both EPF and PRS will maximise and diversify your retirement savings plan and potential tax savings. 

Develop a deeper understanding of PRS from PPA’s online resources. You should know where your retirement savings stand today and your retirement goals. This will help you decide which PRS fund to go for. Explore PRS options with us here. Who knows, you could even retire early!

Source:

*https://www.kwsp.gov.my/member/overview#InvestmentDividends

** https://www.therakyatpost.com/2020/09/26/more-than-50-of-epf-contributors-dont-have-enough-savings-to-survive-after-55/

***https://ringgitplus.com/en/blog/budget-2021/budget-2021-tax-relief-for-sspn-prs-savings-extended.html

****https://www.cimb.com.my/en/personal/day-to-day-banking/investments/private-retirement-scheme.html

This article is for informational purposes only and CIMB does not make any representation and warranty as to the accuracy, completeness and fairness of any information contained in this article. As this article is general in nature, it is not intended to address the circumstances of any particular individual or entity. You are advised to consult a financial advisor or investment professional before making any decisions based on the information contained in this article. CIMB assumes no liability for any consequences arising from your reliance on the information presented here.