In a sign of the times we live in, where e-commerce traffic, streaming services usage and cloud storage demand have surged in the past year, so too are more people turning to online avenues to save for their retirement. In 2020, twice as many new members year-on-year enrolled for a Private Retirement Schemes (PRS) account using the PRS Online service developed by Private Pension Administrator Malaysia (PPA) – the central administrator for PRS.
“Whether it is via PPA’s PRS Online or through one of our eight PRS Providers, it is wonderful to see more Malaysians choosing to include PRS in their retirement savings portfolio,” said Husaini Hussin, CEO of PPA.
“Last year’s ‘Jom PRS, Get Treats’ online enrolment contest was designed to give Malaysians an additional reason to save, and so this higher adoption of financial technology, or fintech, is a welcome trend.”
The Importance of Saving
The grand prize recipient, Chan Yi Hui, who took home RM3,000 in PRS units, said events of the past year is a good wake up call and reminder to always have adequate savings. “You can never know what will happen in the future, so it is definitely important to set aside some of your income to be prepared,” said Chan, an aggressive saver who sets aside 30 – 50% of his income every month.
This sentiment was also shared by 2nd prize recipient Kho Wen Lin and 3rd prize recipient Lai Pei Yee, who received a RM2,000 and RM1,000 boost respectively to their PRS savings. Both said the experience of going through a pandemic made them more cautious with their personal finances, but the series of movement control orders has also inadvertently increased their capacity to save.
“Because of the pandemic, I cut down on a lot of transportation cost, outside food spending and hotel stays because there was no opportunity to travel,” said Kho, who envisions a worry-free retirement where his savings generate enough passive income to cover living expenses.
“So I decided to save the extra money in PRS.”
Additional Savings from PRS Tax Relief
Aside from having some extra money to save, as well as an easy, convenient and secure way to do so with PRS Online, all prize recipients also said the PRS Tax Relief by the government is an encouraging factor for them to save in PRS. Chan, for instance, said he did the calculations and realised that the tax benefit is substantial. Kho echoed that he sees the tax relief as a good way to save more for the future. As for Lai, she decided to put her salary increment last year to good use by saving in PRS to give herself that additional tax relief.
The PRS Tax Relief of up to RM3,000 per year will benefit retirement savers for many years to come, as it was recently extended until 2025.
Visit the PPA website to get a more detailed illustration of your potential tax savings through the PRS Tax Relief.
Moving forward, Lai said she will be monitoring her PRS fund performance once every few months. “I opted for the high risk, high return option as I am still young,” said Lai, who first learnt about PRS from her colleagues and will not hesitate to recommend it to any friends or family members looking to save additionally for their future.
As a voluntary scheme regulated by Securities Commission Malaysia, the PRS industry remained resilient despite a challenging year. The growth of new PRS Members increased by 25% year-on-year, and the total net asset value of PRS funds rose by more than 37% to RM4.8 billion in the same period. Building on this momentum, Malaysians can look forward to more financial education-related contents, PRS webinars and exciting campaigns from PPA this year.