Should I invest in SSPN-i (renamed as SSPN1M) for my child’s higher education? What are the returns, pros, and cons?

Updated: April 17, 2019

 

What is Skim Simpanan Pendidikan Nasional (SSPN)?

SSPN (National Education Savings Scheme) is a savings scheme for higher education launched in 2004.

SSPN was introduced by the Goverment through Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) aka National Higher Education Fund Corporation.

Depositors agree for PTPTN to manage and invest their deposits under the Islamic concept of “Wakalah Bil Istithmar”.

SSPN offers returns of ~4% and annual tax relief of up to RM6,000.

From 2012, having a SSPN account is a pre-requisite for taking a PTPTN loan.

From 2018, SSPN is renamed as SSPN1M (SSPN 1 Malaysia).

 

SSPN Eligibility Criteria

  1. Malaysian Citizen
  2. Depositor: Age 18-64
  3. Child Beneficiary: Age below 29
  4. Min account opening: RM20

Account Opening

  • Online
  • PTPTN counter/ agent
  • Banks: Maybank, Bank Islam, Agrobank, Bank Rakyat, or RHB Bank

Note: There are no restrictions on accounts you can open.

 

SSPN Benefits

  1. Child qualifies for PTPTN loan application for higher education.
  2. Matching RM500 savings for RM500 invested in for children aged 7-12 (withdrawable only after age 18)
  3. Parent/guardian tax relief of up to RM6,000 per annum ONLY for parent/guardian of qualified child beneficiary.
    Note: If both parents filing joint tax relief, total combined is RM6,000 only.
  4. Free takaful insurance with minimum deposit RM1,000.
  5. Consideration for matching grant of up to RM10,000 for eligible families with monthly base pay below RM4,000.
  6. Savings guaranteed by the Malaysian government.
  7. Competitive dividends which are tax-exempt.
  8. Flexibility to save in any PTPTN branch, 3000 agent locations, and via online banking.

 

SSPN Returns

SSPN Historical Returns

SSPN Estimated Returns

SSPN estimated returns based on 4.0% p.a. compounding

 

SSPN Tax Relief

Tax relief of up to RM8,000 (increased from RM6,000) per annum for parent/guardian saving SSPN-i for their child.

For parents with separate tax filing and separate SSPN-i account for child, each parent qualifies for tax relief up to RM6,000 each per annum.

SSPN child account must be opened before age 18 to qualify for the tax relief (with annual contribution) until child turns 29.

Note: Self contribution accounts not qualified for tax relief

Tax Relief Example

Tax Savings example above based on RM6,000 p.a. SSPN deposit. Effective tax savings is an estimate based on ~50% simple tax savings as Malaysia is on a progressive tax bracket. Run an online tax calculator or check with a tax consultant for more accurate tax savings.

 

SSPN Takaful Insurance Benefit

Coverage: Death, and Total and Permanent Disability (TPD)

Death Benefit:

  • Ringgit matching deposit amount
  • RM2,000 (depositor)
  • RM500 (beneficiary)

TPD Benefit:

  • Ringgit matching deposit amount (up to RM2.5m maximum)

 

SSPN Contribution Methods

  • PTPTN Counter: debit card/ATM card
  • JomPAY
  • Salary auto-deduction
  • e-SSPN-i online portal
  • PTPTN agents

 

SSPN Account Withdrawal and Closure

SSPN partial withdrawal can be at any time with min RM20 to keep account active.

SSPN complete account closure can be done at any time. You can opt to reopen your account again.

SSPN account closure also occurs upon depositor death.

SSPN account closure requires submission of deposit withdrawal form, account closure form, copy of savings account book front page, and matching grant form/death certificate/other relevant documents (if applicable).

Stated account closure process time frame is 14 working days with full and complete documents submission.

 

Overall on SSPN

SSPN is an option to save for your child’s higher education for tax benefits, provided returns continue to average ~4% above, and you do not mind your funds being tied down in the account.

Pros

  • RM8,000 tax relief is decent provided your chargeable income is at least above RM35,000 (above RM2,916 monthly). This will be at 10% or higher tax bracket.
  • Extra perks of PTPTN loan qualification, and free takaful insurance coverage.

Cons

  • There have been some complaints about inefficiencies and delays for funds disbursements.
  • PTPTN has faced difficulties collecting back loans made out although PTPTN has since denied it is facing any financial difficulties.

 

More Info

 

FAQ

Q: Can I open a SSPN-i account if it is not my child? Can I claim tax relief?
You need to be the legal parent or guardian of the child. Tax relief is only for the legal parent or guardian.

Q: Can I open a SSPN-i account for my child even though I am declared bankrupt?
Yes you can.

Q: What banks (agents) can I make payments through?
Maybank, Bank Islam, Agrobank, Bank Rakyat, RHB Bank, CIMB Bank, and BSN.

Q: Does the SSPN tax relief include dividends?
No. Only the (up to) deposited in the year qualifies for tax relief. SSPN dividends are tax exempt though.

Q: What is SSPN-i Plus? Will I qualify for another RM6,000 tax relief?
SSPN-i Plus although similar sounding is different from SSPN. SSPN-i Plus is takaful (insurance) coverage which costs you from RM30 upwards monthly providing. This qualifies for a further RM6,000 tax relief BUT only if you have not maxed out your EPF/life insurance contribution.

Q: After graduation, can child continue to maintain SSPN? e.g. for post-grad studies. If yes, does the parent/child get tax relief?
Yes, SSPN-i accounts can be continued on.  Tax relief would only be for parent as depositor paying for child beneficiary. The child account must be converted to an individual account at age 29 to continue saving with SSPN.

Q: Does account closure have to be for one of the reasons stated above?
A: Checking with PTPTN, you can close your SSPN-i account (full withdrawal) at any time (not necessarily for withdrawal from child withdrawal from education/public university or other reasons listed above).