Smart Investor Malaysia

Getting To Know Private Retirement Schemes (PRS)


For most people, the goal is to be able to retire comfortably. However, the effects of the Covid-19 pandemic have made achieving this goal a lot more challenging. But have you heard about Private Retirement Schemes?

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Various economists have warned that a retirement crisis is on the horizon. To insulate ourselves from this retirement crisis, the best time to act is now. The earlier you start saving for your retirement, or even growing your wealth again after it has taken a hit, the better.

This time, we would like to explore a wealth-building option known as a “Private Retirement Scheme”, or more commonly known as “PRS”. This investment solution is offered and managed by PRS Providers and is governed by the Securities Commission Malaysia.

As the name indicates, a PRS is a voluntary long-term investment scheme that is designed to help you save more for your retirement. First introduced in 2012, it is meant to help encourage people to contribute to their retirement savings.

Investments in PRS are structured in the following manner: contributions are divided into two sub-accounts, and you can only make withdrawals once you reach retirement age. You are permitted to make partial withdrawals before then, but you will incur a penalty fee (there are exceptions, such as emigration).

Contributions to PRS are entirely voluntary. It seeks to enhance choices available for all Malaysians, whether employed or self-employed, to supplement their retirement savings under a well-structured and regulated environment. Each PRS offers a wide range of retirement funds from which you may choose to invest in based on your retirement needs, goals and risk appetite.

Why Invest In Private Retirement Schemes?

Investing in PRS may be one of the best things you can do for your retirement. Here’s why:

Designed for retirement

As a scheme originally established to help investors accumulate more savings for their retirement, you can be assured that there is a selection of investment options to suit your specific goals and needs.

Easy investments

Anyone can invest in a PRS. There is a wide choice of PRS Providers and self-selected funds, as well as default option funds that have been pre-selected based on investors’ age.

Affordable savings

The minimum contribution varies depending on your chosen PRS Provider. While the flexible nature of the investment scheme means that there is less pressure on you to commit to a certain amount, just remember that the more you ‘save’, the better your potential returns can be.

Tax incentive

At the moment, the benefits of investing in PRS are not only for the future. In the short term, you can also enjoy a yearly personal tax relief of up to RM3,000 from your taxable income, for as long as you contribute to a PRS (the tax relief is available up to 2025). The earnings generated from a PRS will also be tax exempted, so that is even more reason to contribute!

Factors To Consider Before Investing In Private Retirement Schemes

When making your PRS contribution, you need to consider various factors such as your age, personal and household income, risk tolerance, retirement objectives as well as the suitability of the different funds offered under the various schemes to meet your retirement needs.

The following chart offers suggestions on what you should take into consideration prior to investing in PRS. While the rule of thumb is that your investment strategy should be based upon the time you have until retirement (i.e. long-term investment strategies should focus more on capital growth, while short-term investment strategies should focus on income generation), remember that everyone’s situation is different, and that you should always consult an expert should you have any questions.

Read: Who Are Unit Trust Consultants?

Among the key items to note:

Objectives: Based on your intended goals, you can choose to invest with the intention of growing your capital, generating income, or a combination of both. The goals of each person are different. As such, it is important to decide which option you wish to take.

Your life stage: Those who are nearing retirement age should focus on investments that can provide them with a sustainable income, while younger people should be looking towards investments that have a higher potential for growth.

Your risk appetite: Investors who can handle greater risks tend to be those with a long-term view as they are more able to weather any market volatility. Those who value stability tend to be those already nearing retirement age and therefore, would benefit more from investments that would allow them to preserve their initial capital.

Additionally, it is important to review your PRS portfolio regularly. As your life progresses, your circumstances change and so do your needs and objectives. Hence, do ensure that your PRS portfolio continues to match your risk appetite and investment objectives.

Investment Risks Associated With Private Retirement Schemes

Investing in PRS is not risk-free. You will be exposed to some general investment risks as well as specific risks when investing in PRS. Therefore, you must consider the different type of risks that may affect you and the fund.

These risks are disclosed in the PRS’ Disclosure Document and Product Highlights Sheet (PHS).

How Do I Invest In Private Retirement Schemes?

Your journey to save more for your retirement with PRS begins with these four simple steps:

1. Select your PRS Provider.

2. Choose a suitable fund.

3. Open your PRS account.

4. Top up your funds regularly.

The Final Word About Private Retirement Schemes

Remember that with careful planning, a PRS can be a useful tool to help you in your wealth-building journey. By staying focused, disciplined and investing wisely, you can be assured of a comfortable nest egg once you reach your golden years.

Read: Getting To Know Unit Trust Schemes

This article is in collaboration with The Federation of Investment Managers Malaysia (FIMM), a self-regulatory organization (SRO) that regulates the marketing and distribution of Unit Trust Schemes (UTS) and Private Retirement Schemes (PRS).

Visit for more information on PRS, Unit Trusts, and UTS & PRS Consultants.

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