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There Are No Dumb Questions About Money: Answers and Advice to Help You Make the Most of Your Finances
Wednesday, October 30, 2013
There Are No Dumb Questions About Money: Answers and Advice to Help You Make the Most of Your Finances
Click To Buy:
There Are No Dumb Questions About Money: Answers and Advice to Help You Make the Most of Your Finances
8 Ways Of Controlling Your Personal Debt
Learn how to control your personal debt and accomplish your financial goals, by making your personal debt work for you.
1. Some debt is good.
Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.
2. Some debt is bad.
Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.
3. Get a handle on your spending.
Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.
4. Pay off your highest-rate debts first.
The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.
5. Don't fall into the minimum trap.
If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.
6. Expect the unexpected.
Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken or damaged car can seriously upset your finances.
7. Don't be so quick to pay down your mortgage.
Don't pour all your cash into paying off a mortgage if you have other debt. Mortgages tend to have lower interest rates than other debt, and you may deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)
8. Get help as soon as you need it.
If you have more debt than you can manage, get help before your debt breaks your back. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances. But there are also a lot of disreputable agencies out there.
1. Some debt is good.
Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.
2. Some debt is bad.
Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.
3. Get a handle on your spending.
Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.
4. Pay off your highest-rate debts first.
The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.
5. Don't fall into the minimum trap.
If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.
6. Expect the unexpected.
Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken or damaged car can seriously upset your finances.
7. Don't be so quick to pay down your mortgage.
Don't pour all your cash into paying off a mortgage if you have other debt. Mortgages tend to have lower interest rates than other debt, and you may deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)
8. Get help as soon as you need it.
If you have more debt than you can manage, get help before your debt breaks your back. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances. But there are also a lot of disreputable agencies out there.
10 steps to making a financial budget
1. Budgets are a necessary evil.
They're the only practical way to get a grip on your spending - and to make sure your money is being used the way you want it to be used.
2. Creating a budget generally requires three steps.
- Identify how you're spending money now.
- Evaluate your current spending and set goals that take into account your long-term financial objectives.
- Track your spending to make sure it stays within those guidelines.
3. Use software to save grief.
If you use a personal-finance program such as Quicken or Microsoft Money, the built-in budget-making tools can create your budget for you.
4. Don't drive yourself nuts.
One drawback of monitoring your spending by computer is that it encourages overzealous attention to detail. Once you determine which categories of spending can and should be cut (or expanded), concentrate on those categories and worry less about other aspects of your spending.
5. Watch out for cash leakage.
If withdrawals from the ATM machine evaporate from your pocket without apparent explanation, it's time to keep better records. In general, if you find yourself returning to the ATM more than once a week or so, you need to examine where that cash is going.
6. Spending beyond your limits is dangerous.
But if you do, you've got plenty of company. Government figures show that many households with total income of $50,000 or less are spending more than they bring in. This doesn't make you an automatic candidate for bankruptcy - but it's definitely a sign you need to make some serious spending cuts.
7. Beware of luxuries dressed up as necessities.
If your income doesn't cover your costs, then some of your spending is probably for luxuries - even if you've been considering them to be filling a real need.
8. Tithe yourself.
Aim to spend no more than 90% of your income. That way, you'll have the other 10% left to save for your big-picture items.
9. Don't count on windfalls.
When projecting the amount of money you can live on, don't include dollars that you can't be sure you'll receive, such as year-end bonuses, tax refunds or investment gains.
10. Beware of spending creep.
As your annual income climbs from raises, promotions and smart investing, don't start spending for luxuries until you're sure that you're staying ahead of inflation. It's better to use those income increases as an excuse to save more.
They're the only practical way to get a grip on your spending - and to make sure your money is being used the way you want it to be used.
2. Creating a budget generally requires three steps.
- Identify how you're spending money now.
- Evaluate your current spending and set goals that take into account your long-term financial objectives.
- Track your spending to make sure it stays within those guidelines.
3. Use software to save grief.
If you use a personal-finance program such as Quicken or Microsoft Money, the built-in budget-making tools can create your budget for you.
4. Don't drive yourself nuts.
One drawback of monitoring your spending by computer is that it encourages overzealous attention to detail. Once you determine which categories of spending can and should be cut (or expanded), concentrate on those categories and worry less about other aspects of your spending.
5. Watch out for cash leakage.
If withdrawals from the ATM machine evaporate from your pocket without apparent explanation, it's time to keep better records. In general, if you find yourself returning to the ATM more than once a week or so, you need to examine where that cash is going.
6. Spending beyond your limits is dangerous.
But if you do, you've got plenty of company. Government figures show that many households with total income of $50,000 or less are spending more than they bring in. This doesn't make you an automatic candidate for bankruptcy - but it's definitely a sign you need to make some serious spending cuts.
7. Beware of luxuries dressed up as necessities.
If your income doesn't cover your costs, then some of your spending is probably for luxuries - even if you've been considering them to be filling a real need.
8. Tithe yourself.
Aim to spend no more than 90% of your income. That way, you'll have the other 10% left to save for your big-picture items.
9. Don't count on windfalls.
When projecting the amount of money you can live on, don't include dollars that you can't be sure you'll receive, such as year-end bonuses, tax refunds or investment gains.
10. Beware of spending creep.
As your annual income climbs from raises, promotions and smart investing, don't start spending for luxuries until you're sure that you're staying ahead of inflation. It's better to use those income increases as an excuse to save more.
Sunday, October 27, 2013
Five Financial Must-Haves for First Time Home Buyer (in Malaysia)
Here are five financial prerequisites that are musts before you sign on the Sales and Purchase Agreement (SPA).
1. Have adequate Down Payment
Whether you are buying directly from developer or from seller at the subsale market, you must have the down payment of 5-15%. The first step of buying after you’ve identify your desired house, is to sign the booking form and pay 1-2% earnest deposit, or the booking fees. This will allow 14 days for you to arrange for SPA signing.
Upon signing the SPA, you will be required to pay the remaining down payment that adds up to the total of 10%. After that, you’ll need to finance the rest of the purchase price with a bank loan, assuming that you don’t have the ready cash to pay in full. In some cases, depending on the type of the property and your credibility, you may get lower or higher financing margin compared to the industry standard of 90% financing.
If the banks only lend you 85% of the purchase price, you will need to fork out another 5% for the difference. Of course, there are cases with literally no money down. But you will still be required to fork out the down payment and get it back in short term period due to some smart negotiations, special discount or rebate from developer, or creative financing. So the first financial must is to have 5-15% of the down payment accumulated.
2. Estimate How Much Can you Borrow
After you’ve got your down payment ready, the next thing you want to find out is how much installment you can afford to fork out every month. This will determine how big the loan amount you can take. Nowadays, banks are getting more stringent.Your loan servicing affordability is assessed by calculating your personal Debt Service Ratio (DSR).
DSR is equal to your total monthly debt repayment obligation, divided by monthly take-home income (that’s after tax and EPF contribution). Bank Negara requires the bank not to lend borrower more than 60% DSR. In other words, if your take home pay is RM5000/month, you will be able to serve a loan payment of RM3000.
However, it is really not recommended to go for the limit. I would recommend that you keep your DSR under 30%. And this 30% should also include your car loan. Depending on the loan tenure, the younger you are, the longer term you can take, probably up to 30-40 years to completely pay up the mortgage.
At the current interest rate of about 4.3%, and 30 years loan tenure, a monthly payment of RM1000 can serve a loan amount up to RM200,000. After knowing how much you can borrow, the next financial must have is to understand how much you can really afford to pay every month.
3. Understand How much Can you Afford
When you have your own home, there are other related expenses that comes with it, other than the monthly mortgage installment. First, is the maintenance fee if your property is in a gated and guarded community, or a high rise building.
Secondly, you will also need to pay yearly fire insurance premium, quit rent and assessment. Thirdly, there are also regular expenses such as Indah Water Konsortium, water and electricity bill, not mentioning the initial deposit for all these utilities.
Therefore, you’ll need to understand that your expenses will increase when you are staying at your own house, comparing to staying with your parents or renting a place. So how much exactly can you afford? A thorough calculation is recommended.
4 Transaction cost
When making a home purchase, there are also other one time fees that can’t be neglected. You may need to pay real estate broker commission who helps you hunt for houses. There are also legal fees involved to prepare the SPA and also the loan agreement.
Besides that, the biggest amount of all is the stamp duty payable to the government.
SPA Stamp Duty Rates:
First RM 100,000.00 = 1%
Next RM 100,000.01 – RM 500,000.00 = 2%
Next RM 500,000.01 – RM 2,0100,000.00 = 3%
Above RM 2,000,000.00 = 4%
Meanwhile, the loan agreement stamp duty rate is 0.5% for any amount. So all these transaction expenses can add up to a total of about 5% of the purchase price, easily.
5. Get ready with Renovation and Furnishing Cost
After the house keys are handed to you as the proud new homeowner, you will get to do more alteration and enhancement, which will definitely incur some renovation and furnishing. You can always decide the enhancement that suits your budget.
No matter how frugal you are, there will be some basic furnishing required before you can stay comfortably in your new home. So get ready with a minimum fund to cover this inevitable expense. Buying your own home is probably one of the biggest and most important financial decision in your life.
Some people depleted all their accumulated savings after the purchase. Some even incur more consumer debts when they swipe credit cards and opt for installment payback to furnish their home. However, at the end of the day, it is a different feeling, which is more towards satisfaction and fulfilment when you are able to stay in a property that has your name in the ownership title.
kclau.com
1. Have adequate Down Payment
Whether you are buying directly from developer or from seller at the subsale market, you must have the down payment of 5-15%. The first step of buying after you’ve identify your desired house, is to sign the booking form and pay 1-2% earnest deposit, or the booking fees. This will allow 14 days for you to arrange for SPA signing.
Upon signing the SPA, you will be required to pay the remaining down payment that adds up to the total of 10%. After that, you’ll need to finance the rest of the purchase price with a bank loan, assuming that you don’t have the ready cash to pay in full. In some cases, depending on the type of the property and your credibility, you may get lower or higher financing margin compared to the industry standard of 90% financing.
If the banks only lend you 85% of the purchase price, you will need to fork out another 5% for the difference. Of course, there are cases with literally no money down. But you will still be required to fork out the down payment and get it back in short term period due to some smart negotiations, special discount or rebate from developer, or creative financing. So the first financial must is to have 5-15% of the down payment accumulated.
2. Estimate How Much Can you Borrow
After you’ve got your down payment ready, the next thing you want to find out is how much installment you can afford to fork out every month. This will determine how big the loan amount you can take. Nowadays, banks are getting more stringent.Your loan servicing affordability is assessed by calculating your personal Debt Service Ratio (DSR).
DSR is equal to your total monthly debt repayment obligation, divided by monthly take-home income (that’s after tax and EPF contribution). Bank Negara requires the bank not to lend borrower more than 60% DSR. In other words, if your take home pay is RM5000/month, you will be able to serve a loan payment of RM3000.
However, it is really not recommended to go for the limit. I would recommend that you keep your DSR under 30%. And this 30% should also include your car loan. Depending on the loan tenure, the younger you are, the longer term you can take, probably up to 30-40 years to completely pay up the mortgage.
At the current interest rate of about 4.3%, and 30 years loan tenure, a monthly payment of RM1000 can serve a loan amount up to RM200,000. After knowing how much you can borrow, the next financial must have is to understand how much you can really afford to pay every month.
3. Understand How much Can you Afford
When you have your own home, there are other related expenses that comes with it, other than the monthly mortgage installment. First, is the maintenance fee if your property is in a gated and guarded community, or a high rise building.
Secondly, you will also need to pay yearly fire insurance premium, quit rent and assessment. Thirdly, there are also regular expenses such as Indah Water Konsortium, water and electricity bill, not mentioning the initial deposit for all these utilities.
Therefore, you’ll need to understand that your expenses will increase when you are staying at your own house, comparing to staying with your parents or renting a place. So how much exactly can you afford? A thorough calculation is recommended.
4 Transaction cost
When making a home purchase, there are also other one time fees that can’t be neglected. You may need to pay real estate broker commission who helps you hunt for houses. There are also legal fees involved to prepare the SPA and also the loan agreement.
Besides that, the biggest amount of all is the stamp duty payable to the government.
SPA Stamp Duty Rates:
First RM 100,000.00 = 1%
Next RM 100,000.01 – RM 500,000.00 = 2%
Next RM 500,000.01 – RM 2,0100,000.00 = 3%
Above RM 2,000,000.00 = 4%
Meanwhile, the loan agreement stamp duty rate is 0.5% for any amount. So all these transaction expenses can add up to a total of about 5% of the purchase price, easily.
5. Get ready with Renovation and Furnishing Cost
After the house keys are handed to you as the proud new homeowner, you will get to do more alteration and enhancement, which will definitely incur some renovation and furnishing. You can always decide the enhancement that suits your budget.
No matter how frugal you are, there will be some basic furnishing required before you can stay comfortably in your new home. So get ready with a minimum fund to cover this inevitable expense. Buying your own home is probably one of the biggest and most important financial decision in your life.
Some people depleted all their accumulated savings after the purchase. Some even incur more consumer debts when they swipe credit cards and opt for installment payback to furnish their home. However, at the end of the day, it is a different feeling, which is more towards satisfaction and fulfilment when you are able to stay in a property that has your name in the ownership title.
kclau.com
Saturday, October 26, 2013
5 Moments You're Most Likely to Overspend
When You're Avoiding the Crowds
You may be tempted to tackle your shopping list during the morning on a weekday, when the stores is practically guaranteed to be blessedly empty. But shopping at crowded stores could help your wallet: We're less likely to buy unnecessary items when we're surrounded by swarms of people.It's like we go into survival mode, where we immediately think of what we need to get in and get out (and emerge relatively unscathed)
When You've Opened Another Bank Account
Study found that people tend to save more when they have just one place to deposit money. That's because they have a better knowledge of how much is there—and how much they're spending, researchers say. When our income is spread across a few places, we can easily justify a purchase by thinking, "Oh, but I have money in that other account, too."
When You're Buying Something Embarrassing
If you've ever bought some candy, a magazine or a collector's edition DVD box set to deflect from what you really need to pick up (ahem, antifungal foot cream), you're not alone: almost 80 percent of people spend money on unnecessary extras to divert the cashier's and other shoppers' attention
If the thought of buying just the item you really need makes you anxious, search for a distraction purchase you'll use, like paper towels or toothpaste.
When You Could Use a Little Support
It's no surprise that we're likely to splurge when we're feeling down, but 75 percent of women say they're shopping to treat someone else, finds University of Hertfordshire research. Sadness can make us crave others' support.Buying gifts for those we care about can help us feel more connected to them when money is tight, it's easier to justify spending on someone other than ourselves.
When You're Reminded of the Time
The clock can rule our schedules, our thoughts and, as it turns out, our bank accounts. When a sign encouraged people to "spend a little time, enjoy C&D's lemonade," they were more likely to stop and buy a drink—and pay 51 percent more for it (compared to a those who saw a sign that asked them to "spend a little money"). Why? In the 2008 study from Stanford University, researchers found that 'spending time' makes us feel more like we're buying an experience, not parting with our hard-earned cash.
The subtle shift is enough to make us feel like we're investing in something to do—which most other research states will make us happier than material possessions—but in essence, it's just stuff masquerading as an experience.
You may be tempted to tackle your shopping list during the morning on a weekday, when the stores is practically guaranteed to be blessedly empty. But shopping at crowded stores could help your wallet: We're less likely to buy unnecessary items when we're surrounded by swarms of people.It's like we go into survival mode, where we immediately think of what we need to get in and get out (and emerge relatively unscathed)
When You've Opened Another Bank Account
Study found that people tend to save more when they have just one place to deposit money. That's because they have a better knowledge of how much is there—and how much they're spending, researchers say. When our income is spread across a few places, we can easily justify a purchase by thinking, "Oh, but I have money in that other account, too."
When You're Buying Something Embarrassing
If you've ever bought some candy, a magazine or a collector's edition DVD box set to deflect from what you really need to pick up (ahem, antifungal foot cream), you're not alone: almost 80 percent of people spend money on unnecessary extras to divert the cashier's and other shoppers' attention
If the thought of buying just the item you really need makes you anxious, search for a distraction purchase you'll use, like paper towels or toothpaste.
When You Could Use a Little Support
It's no surprise that we're likely to splurge when we're feeling down, but 75 percent of women say they're shopping to treat someone else, finds University of Hertfordshire research. Sadness can make us crave others' support.Buying gifts for those we care about can help us feel more connected to them when money is tight, it's easier to justify spending on someone other than ourselves.
When You're Reminded of the Time
The clock can rule our schedules, our thoughts and, as it turns out, our bank accounts. When a sign encouraged people to "spend a little time, enjoy C&D's lemonade," they were more likely to stop and buy a drink—and pay 51 percent more for it (compared to a those who saw a sign that asked them to "spend a little money"). Why? In the 2008 study from Stanford University, researchers found that 'spending time' makes us feel more like we're buying an experience, not parting with our hard-earned cash.
The subtle shift is enough to make us feel like we're investing in something to do—which most other research states will make us happier than material possessions—but in essence, it's just stuff masquerading as an experience.
Wednesday, October 23, 2013
Smarter Option - PRS
PRS is a voluntary long-term investment scheme designed to help individuals accumulate savings for retirement. PRS seek to enhance choices available for all Malaysians, whether employed or self-employed, to voluntarily supplement their retirement savings under a well-structured and regulated environment.
Each PRS offers a choice of retirement funds from which individuals may choose to invest in based on their own retirement needs, goals and risk appetite. The fund options under a PRS are intended to enhance long-term returns for members within a regulated framework. Assets of each PRS are segregated from the PRS Provider and held by independent Scheme Trustee under a trust.
REGULATORY FRAMEWORK
The Capital Markets and Services Act 2007 (CMSA) empowers the SC to regulate and supervise the PRS industry.
Summary of Roles and Responsibilities
-Securities Commission (SC) Malaysia
-empowered by law to be the regulator of the PRS industry
-provide a regulatory environment
-development of PRS industry
PRS Providers
-exercise the PRS Provider’s powers for a proper purpose and in good faith, in the best interest of the members as a whole
-exercise the degree of care and diligence
-keep complete and accurate records of all information
-not make investments in which it could have a financial interest or derive a benefit without -approval of the Scheme Trustee
-provide interim reports, annual reports and account statements
-exercise the PRS Provider’s powers for a proper purpose and in good faith, in the best interest of the members as a whole
-exercise the degree of care and diligence
-keep complete and accurate records of all information
-not make investments in which it could have a financial interest or derive a benefit without -approval of the Scheme Trustee
-provide interim reports, annual reports and account statements
SCHEME TRUSTEE
Each PRS scheme is required to appoint an approved PRS scheme trustee to actively monitor the operation and management of the fund under the scheme by the PRS Provider to safeguard the interests of members.
The scheme trustees has a fiduciary duty to ensure that the PRS Provider comply with the scheme’s deed and disclosure document. In addition, the PRS scheme trustee provides custodianship of the PRS fund’s assets.
PRS PROVIDERS
- AIA Pension And Asset Management Sdn Bhd
-AmInvestment Management Sdn Bhd
-CIMB- Principal Asset Management Berhad
-Hwang Investment Management Berhad
-Kenanga Investors Berhad
-Manulife Asset Management Services Berhad
-Public Mutual Berhad
-RHB Investment Management Sdn Bhd.
PRS PROVIDERS & FUND OPTIONS
You may choose to contribute to one or more PRS Provider. Under each PRS Provider, you can further choose to invest into one or more funds by either contributing based on the default option (age-based selection) or select a fund based on your preferred choice.
What you Need to Know!
PRS Providers Funds & Performance
PRS Fund selection
a. Growth, Growth & Income & Income Funds
b. Default Option Funds or Self Selected Funds
PRS Fund Risks
Fees & Charges
a. Funds Sales Charge
b. Annual Management Fees
Transaction Fees
PRS Funds Selection Option
You can decide to choose a fund or not to choose a fund and invest based on the default option where contributions are allocated to the core funds based on your age. Each PRS Provider must offer the 3 core funds as a default option in their PRS.
If you choose the default option you will be allocated to the following core funds based on your age grouping:Core Funds Age Asset Allocation
Growth fund Age below 40 years Maximum 70% in equity; 30% in debentures/fixed income and money market instruments
Moderate fund Age 40 years and above but have not yet reached 50 years Maximum of 60% in equity; 40% in debentures/fixed income and money market instruments
Conservative fund Age 50 years and above 80% in debentures/fixed income instruments of which a minimum of 20% must be in money market instruments and a maximum of 20% in equity
Alternatively, you may choose any of the core funds which does not correspond with your age or any of the non-core funds offered by the PRS Provider.
The PRS Provider may offer a range of up to 7 non-core funds under their PRS scheme. You may choose to invest in one or more of these non-core funds based on the fund’s asset allocation and asset classes as well as whether the fund is a conventional, shariah-based, local or offshore fund.
What you Need to Know!
PRS Providers Funds & Performance
PRS Fund selection
a. Growth, Growth & Income & Income Funds
b. Default Option Funds or Self Selected Funds
PRS Fund Risks
Fees & Charges
a. Funds Sales Charge
b. Annual Management Fees
Transaction Fees
PRS Funds Selection Option
You can decide to choose a fund or not to choose a fund and invest based on the default option where contributions are allocated to the core funds based on your age. Each PRS Provider must offer the 3 core funds as a default option in their PRS.
If you choose the default option you will be allocated to the following core funds based on your age grouping:Core Funds Age Asset Allocation
Growth fund Age below 40 years Maximum 70% in equity; 30% in debentures/fixed income and money market instruments
Moderate fund Age 40 years and above but have not yet reached 50 years Maximum of 60% in equity; 40% in debentures/fixed income and money market instruments
Conservative fund Age 50 years and above 80% in debentures/fixed income instruments of which a minimum of 20% must be in money market instruments and a maximum of 20% in equity
Alternatively, you may choose any of the core funds which does not correspond with your age or any of the non-core funds offered by the PRS Provider.
The PRS Provider may offer a range of up to 7 non-core funds under their PRS scheme. You may choose to invest in one or more of these non-core funds based on the fund’s asset allocation and asset classes as well as whether the fund is a conventional, shariah-based, local or offshore fund.
PRS SCHEME FEATURES
Contributions
Individuals
Any individual who has attained the age of 18 years as of the date of the account opening of a private pension account may make a contribution to any fund under the PRS. The PRS is offered to Malaysians and non-Malaysians as well.
Contributions to any fund under the PRS will be maintained in two separate sub-accounts by the PRS Providers as follows:
Individuals
Any individual who has attained the age of 18 years as of the date of the account opening of a private pension account may make a contribution to any fund under the PRS. The PRS is offered to Malaysians and non-Malaysians as well.
Contributions to any fund under the PRS will be maintained in two separate sub-accounts by the PRS Providers as follows:
70% in Sub-account A which must not be made available for pre-retirement withdrawal; and
30% in Sub-account B which would be available for pre-retirement withdrawal subject to payment of an 8% tax penalty on the withdrawal sum.
Individuals have the option to contribute to more than one fund under a PRS Scheme or to contribute to more than one PRS Scheme, offered by different PRS Providers.
Being a voluntary scheme, there are no fixed amounts or fixed intervals for making contributions. Individuals can contribute to the PRS as often as they like and are encouraged to consistently save up to achieve their intended retirement goals.
Individual Tax Relief
The individual tax relief is applicable on gross contribution, i.e. inclusive of upfront charges.
For example, if an individual invested RM3,000 with a Provider and that Provider deducted RM10 for account opening fee, and RM50 for sales charge, the full RM3,000 is eligible for tax relief, and not RM2,940.
Tax relief of up to RM3,000 per annum will be applied on taxable income, for individual contributions made to the PRS for the first 10 years from assessment year 2012. Individuals may claim their individual tax relief for the PRS under Section F-F18 of the BE Form, which can be located at the Lembaga Hasil Dalam Negeri Malaysia (LHDNM) website at www.hasil.gov.my
Contribution statements to support the claim for tax relief may be obtained from the Provider as proof of investment made for the year of assessment.
Employers
Where an employer seeks to contribute to the PRS on behalf of its employees, the employer may enter into an arrangement with one or more PRS Providers of their choice. The amount and frequency of contribution is determined by the employer while employees choose the type of fund(s) under the Scheme offered by the PRS Provider. Where employees do not make a fund selection, the employer contributions would be channelled to the default option of the chosen PRS Provider.
Employer Tax Relief
Employers contributing to PRS on behalf of their employees are eligible for a tax deduction on their contributions above the EPF statutory rate, up to 19% of the contribution. Please note that the employer tax relief is only applicable on the company as an entity.
Switching / Transfer
Switching occurs when a Member requests for a transfer of the existing PRS fund invested in to another PRS fund in the PRS Scheme of the same PRS Provider.
Transfer occurs when a Member requests for a transfer of the existing PRS fund invested in to another PRS fund in the PRS Scheme of another PRS Provider.
Members are allowed to switch between funds in the scheme or transfer the accrued benefits to another PRS of another PRS Provider, subject to the terms and conditions as specified in the scheme’s disclosure document. Please read the scheme’s disclosure document before deciding to make a contribution. If you do not have a copy, please contact the PRS Provider to ask for one.
Transfers can only be instructed between Providers after the first year of subscription to the PRS from the date of first contribution. A transfer request can only be conducted once per calendar year and Members are only allowed to transfer to one fund.
For fees and charges on switching and transfer, please refer to the Providers page of this website under Fees and Charges.
Withdrawals
Request for withdrawals may be made in the following circumstances and as follows:
After the day the member reaches the retirement age (or at any other age as the SC may specify from time to time), withdrawals may be made in part or in full;
Following the death of a member, only full withdrawals may be made;
Prior to the member reaching the retirement age, withdrawals from sub-account B may be made in part or in full; or
Permanent departure of a member from Malaysia, only full withdrawals may be made.
The following are not considered a withdrawal from a Scheme:
Exercise of cooling-off rights;
Withdrawal / Redemption for the purpose of transfer to a scheme by another PRS Provider;
Switching of units of a fund to the units of any other fund of the Scheme.
(Note: Members would be informed if any changes are made to the current specified age.)
With respect to pre-retirement withdrawals, members may only withdraw the amount in sub-account B from each PRS Provider once a year. The first pre-retirement withdrawal can only be requested by a member one year after making the first contribution to any fund under the Scheme (whether the contribution is by an employer or member). While pre-retirement withdrawal may be made for any reason, a tax penalty of 8% on the withdrawal amount will be deducted by the PRS Providers before the balance is credited to the member’s account.
There is no tax penalty for withdrawal upon reaching retirement age of 55 years. Although employees above 55 years of age are still under employment, they are considered as having reached retirement age. As such, retirement withdrawals are allowed with no tax penalty involved.
Although lump sum withdrawals are permitted, members are encouraged to retain their savings for continuous investment under the respective Schemes.
Documentation for Withdrawal
Other than withdrawal due to death and permanent departure, no documents and reasons are required to make a pre-retirement withdrawal.
For pre-retirement withdrawals due to death or permanent departure from Malaysia, the following information and a copy of the following supporting documents must be sent to the PRS Provider as soon as reasonably possible for prior authorisation by the PPA:
Permanent Departure (surrendering of Malaysian work permit or citizenship)
Full Name, NRIC/ identification number and PPA account number; and
Letter of renounciation of Malaysian Citizenship (Form K/ Form Y); or
Letter to confirm surrender of identity card from the National Registration Department (NRD); or
Letter to confirm surrender of identity card from Malaysian Embassy/ High Commission of Malaysia/ Malaysian Consulate in foreign country
Expatriate and Foreign Worker withdrawal
Proof of termination of work
Full Name, passport number and PPA account number; and
Letter of resignation/ termination of contact of service by employer; or
Income tax clearance statement; or
Cancellation of work permit
Non-Working (unemployed) Foreigner withdrawal
Full Name, passport number and PPA account number; and
Proof of cancellation of long term social visit pass
Death
Full Name, NRIC/ identification number (Malaysian) or passport number (Foreigner) and PPA account number; and
Death certificate; and
Letter of Administration / Grant of Probate / Sijil Faraid; and
Copy of Claimant’s NRIC
(Note: In the event of death, the PRS monies will return to the estate of the deceased member to be distributed in accordance to the instruction of the court.)
30% in Sub-account B which would be available for pre-retirement withdrawal subject to payment of an 8% tax penalty on the withdrawal sum.
Individuals have the option to contribute to more than one fund under a PRS Scheme or to contribute to more than one PRS Scheme, offered by different PRS Providers.
Being a voluntary scheme, there are no fixed amounts or fixed intervals for making contributions. Individuals can contribute to the PRS as often as they like and are encouraged to consistently save up to achieve their intended retirement goals.
Individual Tax Relief
The individual tax relief is applicable on gross contribution, i.e. inclusive of upfront charges.
For example, if an individual invested RM3,000 with a Provider and that Provider deducted RM10 for account opening fee, and RM50 for sales charge, the full RM3,000 is eligible for tax relief, and not RM2,940.
Tax relief of up to RM3,000 per annum will be applied on taxable income, for individual contributions made to the PRS for the first 10 years from assessment year 2012. Individuals may claim their individual tax relief for the PRS under Section F-F18 of the BE Form, which can be located at the Lembaga Hasil Dalam Negeri Malaysia (LHDNM) website at www.hasil.gov.my
Contribution statements to support the claim for tax relief may be obtained from the Provider as proof of investment made for the year of assessment.
Employers
Where an employer seeks to contribute to the PRS on behalf of its employees, the employer may enter into an arrangement with one or more PRS Providers of their choice. The amount and frequency of contribution is determined by the employer while employees choose the type of fund(s) under the Scheme offered by the PRS Provider. Where employees do not make a fund selection, the employer contributions would be channelled to the default option of the chosen PRS Provider.
Employer Tax Relief
Employers contributing to PRS on behalf of their employees are eligible for a tax deduction on their contributions above the EPF statutory rate, up to 19% of the contribution. Please note that the employer tax relief is only applicable on the company as an entity.
Switching / Transfer
Switching occurs when a Member requests for a transfer of the existing PRS fund invested in to another PRS fund in the PRS Scheme of the same PRS Provider.
Transfer occurs when a Member requests for a transfer of the existing PRS fund invested in to another PRS fund in the PRS Scheme of another PRS Provider.
Members are allowed to switch between funds in the scheme or transfer the accrued benefits to another PRS of another PRS Provider, subject to the terms and conditions as specified in the scheme’s disclosure document. Please read the scheme’s disclosure document before deciding to make a contribution. If you do not have a copy, please contact the PRS Provider to ask for one.
Transfers can only be instructed between Providers after the first year of subscription to the PRS from the date of first contribution. A transfer request can only be conducted once per calendar year and Members are only allowed to transfer to one fund.
For fees and charges on switching and transfer, please refer to the Providers page of this website under Fees and Charges.
Withdrawals
Request for withdrawals may be made in the following circumstances and as follows:
After the day the member reaches the retirement age (or at any other age as the SC may specify from time to time), withdrawals may be made in part or in full;
Following the death of a member, only full withdrawals may be made;
Prior to the member reaching the retirement age, withdrawals from sub-account B may be made in part or in full; or
Permanent departure of a member from Malaysia, only full withdrawals may be made.
The following are not considered a withdrawal from a Scheme:
Exercise of cooling-off rights;
Withdrawal / Redemption for the purpose of transfer to a scheme by another PRS Provider;
Switching of units of a fund to the units of any other fund of the Scheme.
(Note: Members would be informed if any changes are made to the current specified age.)
With respect to pre-retirement withdrawals, members may only withdraw the amount in sub-account B from each PRS Provider once a year. The first pre-retirement withdrawal can only be requested by a member one year after making the first contribution to any fund under the Scheme (whether the contribution is by an employer or member). While pre-retirement withdrawal may be made for any reason, a tax penalty of 8% on the withdrawal amount will be deducted by the PRS Providers before the balance is credited to the member’s account.
There is no tax penalty for withdrawal upon reaching retirement age of 55 years. Although employees above 55 years of age are still under employment, they are considered as having reached retirement age. As such, retirement withdrawals are allowed with no tax penalty involved.
Although lump sum withdrawals are permitted, members are encouraged to retain their savings for continuous investment under the respective Schemes.
Documentation for Withdrawal
Other than withdrawal due to death and permanent departure, no documents and reasons are required to make a pre-retirement withdrawal.
For pre-retirement withdrawals due to death or permanent departure from Malaysia, the following information and a copy of the following supporting documents must be sent to the PRS Provider as soon as reasonably possible for prior authorisation by the PPA:
Permanent Departure (surrendering of Malaysian work permit or citizenship)
Full Name, NRIC/ identification number and PPA account number; and
Letter of renounciation of Malaysian Citizenship (Form K/ Form Y); or
Letter to confirm surrender of identity card from the National Registration Department (NRD); or
Letter to confirm surrender of identity card from Malaysian Embassy/ High Commission of Malaysia/ Malaysian Consulate in foreign country
Expatriate and Foreign Worker withdrawal
Proof of termination of work
Full Name, passport number and PPA account number; and
Letter of resignation/ termination of contact of service by employer; or
Income tax clearance statement; or
Cancellation of work permit
Non-Working (unemployed) Foreigner withdrawal
Full Name, passport number and PPA account number; and
Proof of cancellation of long term social visit pass
Death
Full Name, NRIC/ identification number (Malaysian) or passport number (Foreigner) and PPA account number; and
Death certificate; and
Letter of Administration / Grant of Probate / Sijil Faraid; and
Copy of Claimant’s NRIC
(Note: In the event of death, the PRS monies will return to the estate of the deceased member to be distributed in accordance to the instruction of the court.)
Members of the public should only deal with licensed PRS Distributors and PRS Consultants.
source:ppa.com
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