Youths age 30 and below until 2018 qualify for a PRS Youth Incentive. Here are details of the incentive and what are the requirements to qualify.
Updated: Feb 20, 2018
What is PRS?
PRS is short for Private Retirement Schemes launched in 2012 as a voluntary long-term investment scheme designed to help individuals accumulate savings for retirement.
PRS Youth Incentive
From 2014-2016, the government contributed RM500 into the PRS accounts of youths, who have accumulated RM1,000 within a year.
In 2017, the incentive has been increased to RM1,000 for those who contribute at least RM1,000 in a single PRS fund from 2017-2018.
Applicable only for Malaysian youth aged between 20-30 years old (based on birth date as long as you haven’t turned 31) with min RM1000 contribution to approved PRS.
The youth incentive is applicable once only anytime from 2014-2018.
This means that if you have received the RM500 PRS incentive previously, you will not be eligible for the new improved RM1,000 youth incentive. :(
Other Benefit: RM3000 Tax Relief
As long as you pay individual taxes, there is a tax relief of up to RM3000 for investing in a PRS.
Applicable from 10 years from 2012-2021 only.
If you qualify for both, you enjoy both the youth incentive and tax relief.
As it is a retirement scheme, restrictions are put into place for withdrawal.
You can only withdraw under the following circumstances.
- After the day the member reaches the retirement age, 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;
- Permanent departure of a member from Malaysia, only full withdrawals may be made.
Note: 70% invested in sub-account A; 30% invested in sub-account B
Investing in PRS
Funds are divided (by government directive) to conservative, moderate & growth – with supposedly conservative being the lowest risk & growth the highest risk.
Sales charges depends on the provider selling (as low as 0% sales charge). There are however annual management charges (~1-1.5%) & trustee fees (~0.01-0.05%) which are hidden as directly factored into the pricing.
Should You invest in PRS?
If you qualify for the RM1,000 youth incentive, it is definitely yes as you are technically getting RM1,000 (100% returns) on a RM1000 investment. Additional due to compounding, this would net you an final 30-50% higher returns compared to without the incentive.
However, if you do not qualify for the PRS youth incentive, you will want to consider the tax bracket you are in. As we are based on a progressive tax bracket system, it may or may not make sense to invest RM3,000 for the tax relief. Above RM3,000, there are other investment alternatives with better returns and/or better flexibility in investing your funds.
Q: Where is the youth incentive credited to?
A: It will be credited to your sub-account A & can only be withdrawn upon age 55
Q: Is there a penalty for early withdrawal?
A: You will be taxed at 8% (and only can be withdrawn from sub-account B)