Career Information of Financial Planners

Wonder what is the career as a Financial Planner ? This infographics has some answers.

Source : Financial Planner World
http://www.myceisonline.com

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Private Retirement Scheme-Myths and Concerns

                                                 PRS video : source - www.ppa.my
                                       
We are back after 1 month observing the market response on the PRS. To our surprise, many PRS provider who market the product are jumping in with the advantage of tax savings rather than on the reason of retirement planning. Many people who take up are employees from the Multinational companies(MNCs) who have the financial muscle to provide the top up on the EPF statutory rate of 12-13% for the corporate tax savings advantage.

Many we spoke to are still on the look-and-see situation due to some concerns and myths. Some are valid concerns need to be addressed. Seeing this situation, we decide to conclude the PRS series with the intention to answer some of the concerns and debunking the myths, hopefully.

Private Retirement Scheme,PRS in Malaysia

Yes, show me the retirement figure !

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to RETIRE or not to RETIRE?

One of our common goals is to retire comfortably...while we chasing and dream of that,how much is enough? What is the preparation we must aware of? and will we really can enjoy our retirement or retired for enjoyment thereafter?

First of all the big thing HEALTH!

Because of the advancement in medical technology, humans are living longer than ever.Also, with a balanced diet, exercising and managing the stress in our lives have helped to reduce the chances of hypertension, heart disease, osteoporosis, arthritis, rheumatism and some cancers. The average life expectancy for Malaysian is 74 years (2012 estimate) see Malaysian living lifespan

By having protected by a comprehensive Medical Coverage Insurance will definitely ease the burden on medical expenses! 

Next in the list FINANCES... 

As a person approaching retirement, he / she must acquire financial insights and discipline to ensure they have sufficient money to last the rest of their life.During retirement, there are some expenses that will be reduced and some will increase as they are not apparent before retirement. It is important we take all these expenses into consideration in the retirement planning.

Additional expenses that are not apparent before retirement :

    · Higher medical or dental bills

              · Higher cost of home utilities

              · Higher home upkeep or maintenance

              · Higher recreation, travel or eating out

              · Contributions or gifts (for grandchildren, charity and etc.)

        Expenses that are reduced:

                · Mortgage payment

                · Transportation cost

                · Children expenses

                · Income taxes

                · Food

                · Clothing

Long awaited TRIP!

Retirees should be encouraged to take a trip. However, most people who have just retired are taking their big 2-3 months trip, only to feel deflated and depressed after they return home.It is more advisable to consider a series of smaller holidays and spread over the coming years.

Dilemmas of new BUSINESS venture

Many will consider venture into some sort of business during retirement. If starting off or venture into a business is a serious consideration after retirement, it is encouraged to understand the following issues :

·  working capital requirement. While start up capital is an one-off payment, working capital  represent a continuous cash outflow.

·  the business cycle, try to understand whether it is a new introduction, harvesting or

    maturing cycle.

·  the skills and expertise require to run the business successfully

·  the business structure, whether a sole proprietorship, partnership or limited company

   a better option from tax planning perspective ?

After many years of saving how long will your retirement savings last?

If You Withdraw Both Principal and Interest, 

How Long Will It Take to Exhaust a RM100,000 Retirement Savings Fund?

If we knew exactly how long we were going to live after retirement, this arrangement might be satisfactory. The reality, of course, is that none of us knows how long we will live after retirement. This uncertainty is what makes it so difficult to avoid the risk of outliving retirement income.

With the small sum in EPF of 166,416 (source : EPF annual report 2011) and lifespan at age 74, will you be able to retire comfortably or will you REALLY enjoy Retirement without WORRY ??

Private Retirement Scheme(PRS) in Malaysia

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Boost your NEST EGG...How PRS works?

Malaysia's new retirement scheme - which took three years to come to fruition - is called the Private Retirement Scheme - PRS in short. While the brief introduction are covered last article, in this article we will provide more detail about PRS features, mechanisms.It have some similarity to how an Unit Trust works which the fund offers are actively managed by approved fund providers.

Before we get into the details. Let's us first introduction some PRS Lingo. Here are some of the main differences:

PRS Lingo 

Contributors (not investors): 

They use PRS to save for their retirement.

Contributions (not investments): 

The amount a contributor allocates to a PRS fund.

Providers (not fund managers):

Approved asset managemnet companies that can offer PRS funds

Who is Who in PRS ?

The introduction of the private retirement scheme framework are resulted from study and  recommendations made by the Securities Commission Malaysia (SC) to the Government to accelerate development of the private pension industry in Malaysia.

Security Commission (SC) -  Underpinning the framework is a strong regulatory and supervisory structure based on the SC’s regulatory objectives of ensuring robust regulation and supervision of the PRS industry, promoting trust and confidence in the PRS and protecting interest of members.

Private Pension Administrator - which would be responsible for the operational of an efficient administrative system for the PRS industry.

PRS Providers - each offering a range of fund options under a PRS, where the assets are segregated and held by independent Scheme Trustees under a trust.

Key Features of PRS 

• PRS are defined contributions schemes where the accrued benefits to members are 

determined by the amount contributed plus investment returns thereon. The aim of 

savings in PRS is to make the members’ savings grow over the long-term.

• Members would have the option to contribute to more than one fund under a PRS or to contribute to more than one PRS, offered by different PRS Providers.

• Being voluntary in nature, there would be no fixed amounts or fixed intervals for making contributions to PRS.

• A default option would also be made available for members who select their PRS Provider but do not specify a fund option. The default option would cater for different age groups. PRS Providers would need to ensure that the relevant members are switched to the default funds in accordance with the relevant age group as shown below

	Growth Fund	Moderate Fund	Conservative Fund
Age group	Below 40 years of age	40 - 50 years of age	Above 50 years of age
Parameters	Maximum 70% equites Investment outside Malaysia is permitted	Maximum 60% equites Investment outside Malaysia is permitted	80% in fixed income instruments of which 20% must be in money market instruments and a maximum of 20% in equity Investment outside Malaysia is not permitted

How to contribute to PRS ?

Individual members choose PRS Providers and funds according to their risk appetite and investment profile

 Alternatively, an employer may also channel the contributions to a
 particular PRS Provider where employees choosing the type of funds
 offered by that Provider.

In both scenario, a default option for members shall apply if the fund option is not being 

specified or selected.

Account Maintenance ?

Members would also have the option to switch funds within a PRS at any time, or change to another PRS provider once a year subject to to terms imposed by the PRS Provider. The first transfer can only be requested by a member one year after making the first contribution to any fund under the Scheme.

All contributions made to PRS will be split and maintained in sub-accounts A and B as follows: 

The value of sub-account A and B can increase or decrease according to the unit price. The unit price is the worth of each unit held by a member from day to day. Units are priced daily.The diagram below shows an example of an individual channeling contributions to several funds under a PRS offered by different PRS Providers.

Source : Private Pension Administrator , PPA website

Tax Incentives?

In addition to the tax deduction permitted for EPF contributions tax incentives are provided to both employers and individuals as follows:

- Individuals - tax relief of up to RM3,000 for the first 10 years from assessment year 2012; 

- Employers - tax deduction on contributions to PRS made on behalf of their employees
                       above the EPF statutory rate up to 19% of employees’ remuneration.

- A tax exemption is also provided on income received by the funds under the Schemes.
  As such, it is a double tax incentives benefits for PRS. 

  By the way, are you aware that unit trust management company return on the mutual 
  funds are taxed first at 8% before the nett return reaches the hand of unit holders ? 

How to achieve FINANCIAL FREEDOM or RETIRE RICH ?

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Private Retirement Scheme(PRS) in Malaysia

 

Ever since the Private Retirement Scheme(PRS) was introduced and launched on 18 July 2012 by Securities Commission, it has been the talk of the town and of the investment community because of the potential business opportunities from it. 

At the time of writing,  8 PRS providers (7 unit trusts management companies, 1 insurance company) are awarded the license to operate and market the Private Retirement Scheme (PRS). See list of PRS providers

As this is a new concept in Malaysia, the general public has started to gain more awareness through the newspaper, press, social media. But many still remain sceptical because of the element of risk and uncertainty.

We gathered the top 5 basic business and technical enquiries we have commonly being asked by our clients and shall present them in the PRS series.

What is a PRS ?
Malaysia, just like any other countries, will face the aging population syndrome which require medical and financial support in times to come.  As at 2011, 5% of Malaysia population is of age 65+ and this figure is increasing to double digit by year 2020. (source : indexmundi, Malaysia age structure 2012)

Since most Malaysians either being employed in public sector as civil servant or private sector, there are only 2 financial schemes to support for the old age, namely pension for the civil servants and EPF(Employee Provident Fund) for the private sector employees.

Problem
Unlike the civil servant who will normally receive 50% of last drawn pay as pension amount monthly, the average savings in EPF as of age 54 for an active member in private sector is merely RM 166,416.(source : EPF annual report 2011). This is barely insufficient to last the retired members for next 10 years !

Have a look at the following statistics and see the alarming figure.

An astonishing 87% of EPF members have less than 100k in their account !!

Hence, PRS is a initiative that is formed by the government through Securities Commission to encourage typical Malaysians, and even foreigners who stay in Malaysia to save voluntarily to increase the retirement savings amount and it come with a 10 years tax incentive of RM3,000 per contributor per year. 

Continue to follow us for the next PRS series : How PRS works .

Milestone 10 : Hurray Retiring ...

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