31-Dec-2012 is last day for top-up to enjoy up to RM6000 Tax Relief for SSPN contribution (nett) for YA2012....

SSPN : Disadvantages

SSPN comes with quite a few attractive advantages, but it also has its downsides.

Income Tax Relief is NOT Available for Individual With Own SSPN Account

As this account aims to promote savings for higher education and not for individual interest, the income tax relief is not made available unless you have a legal beneficiary for your account (your own children OR a child under your legal care OR immediate family members).

So to summarise, you can still open an account for your nephew, auntie, best friend etc. but unless you fall under the categories above, you will not be given the income tax relief!

Withdrawing Your Money

Unfortunately, withdrawing money from your SSPN account is not a simple task! Unlike the normal savings account, SSPN has very strict rules when it comes to withdrawing your money.

Depositors can only withdraw their money once a year, and the maximum amount that is allowed to be taken out is RM 500 or 10% of your total savings!

A 100% withdrawal is possible but will require the beneficiary’s offer letter to local university or colleges, a vague statement on the beneficiary ‘no longer wishing to participate in the educational process’, or in the event of the beneficiaruy’s / depositor’s death or incapacitation.

Full closure SSPN without beneficiary’s offer letter to local university or colleges, a vague statement on the beneficiary ‘no longer wishing to participate in the educational process’, or in the event of the beneficiaruy’s / depositor’s death or incapacitation is possible.

This post has been edited by ronnie: Jan 22 2013, 09:17 PM

read carefully... it says withdrawal is only permitted with offer from local uni. other websites say govt approved uni only. nothing on official website detailing list of uni or if private/shophouse college qualifies. come 18 years, when your child is old enough to enroll, the approved uni list will most likely have changed and you will need another 10 years to complete the withdrawal. the only other way to get the money out is if your child gets a certificate of death.

the benefits list is sooo long... but withdrawal terms are so loosely written... i smell a big fat rat

for ppl who can save up to 6k a year, to be entitled to the 26% effective savings, i think they already have quite a bit of income so no need govt uni. good scheme... but not enough to fool ppl smart who earn enough to save 6k a year for one child. damn stupid. pay 26% tax a year to a govt who don't even take care of your kids' education.

with my analysis above, the scheme will definitely collapse and i will get a call from someone in the internal affairs ministry... again.

why u ppl no read... 10% a year withdrawal only. so u put in 6k each year from YA2012 to YA2015, u get a total savings of 18k that you can only take out over a 10 year period. or if your child graduates with certificate of death.

Anybody having problem logging in to the SSPN website?
Shows the pwd incorrect. Even after i reset the pwd and pwd sent to me, still unable to login.
Pening la like this.

Has sspn declared the dividen for 2012 yet?

This year I have to re-register the login... The old login id (which is the account number) is no longer usable, it has to be ic number this time.

SSPN Dividend 2012 has been creditted

This post has been edited by ronnie: Mar 7 2013, 11:05 PM

Ah great.. Ay idea what the d.rate is?

For me it is a ROI of 30.25% for Y2012.

Xuzen

How do you calculate such high ROI ??

You included the 'tax savings' as part of your ROI calculation?

Any idea how much was the dividend for 2012? I did rough calculation it's around 4.2x% ?

Update: Nevermind, just saw it at SSPN website 4.25%... was hoping for it to be closer to EPF....

This post has been edited by poolcarpet: Mar 8 2013, 12:08 PM

It won't be close to EPF dividend lah

LOL, yes of course.

I kena tax'ed at the highest tax bracket... so it is beneficial to me to "plan" my tax.

Xuzen

Ok, I was just thinking about this... most will put in RM3k into SSPN in order to take advantage of the tax relief, and gain up to RM780 in 'instant' returns, correct?

I just quickly created an excel with simple calculation,



and let's assume we only look at 1 year investment return (because year 2-year n is just a repeat of this year 1 investment),
RM3k put in SSPN and RM3k-RM780=RM2220 put in another investment.

Over 17 years, if I can get consistently 2% higher return rate than SSPN dividend, I actually end up with MORE money at the end!

Is my calculation correct or am I missing something here? Anyone understand what I'm trying to say here?

In the past I think it manage to do well, better than just FD..so yeah, it won't match EPF in anyway you can imagine.. But like what everybody does, its purpose is for tax relief. Remember we have 6K instead of 3K tax relief this year .

The RM6k tax relief for SSPN starts from Year Assessment 2012 onwards

First I use Excel to do the calculation.

I pull it for 17 years.

Under column 1: I put in a figure of RM 4,400.00 i.e., RM 6,000.00 less 26%. This means your actual capital is RM 6000.00 - less 26% = RM 4,400.00

Under column 2: I put in a figure of RM 6,000.00 because this is the actual amount put into SSPN every year for the next 17 years consistently.

Under column 3: I key in the formula =Column 2 x 1.04 because I assume SSPN will give a dividend of 4% consistently throughout the whole 17 year tenure.

I repeat the process until I get 17 rows i.e., 17 payment periods.

What I get essentially is:

i) PV = 0 since I start accumulating from zero value

ii) FV = RM 147,872.48 i.e., the total accumulated future value inc dividend reinvested.

iii) N = 17 i.e., 17 years tenure.

iv) PMT = RM 4,440.00 i.e. the actual capital outlay per period of time

v) Mode = End, since the dividend is paid at the end of the period.

From all the 5 parameters above I am able to calculate I, i.e. the Internal Rate of return for this series of investment using a financial calculator.

And from my calculator, the IRR (I) = 7.85% p.a.

Taking into a/c the tax savings, this SSPN saving vehicle is able to give a return of 7.85%p.a.

Can you compare SSPN rtn with an equity unit trust rtn in a direct way? The answer is no.

Because another component we have to take into a/c is Risk adjusted return.

For SSPN, I'll say its volatility or standard deviation from mean (the measurable parameter for riskiness) is very similar to money market fund i.e., around 0.1%

For an efficient unit trust, the usual standard deviation from mean is around 8% and a typical long term rtn is around 10% p.a.

So, let's compare the risk adjusted return of SSPN vs a efficient equity unit trust.

SSPN = (7.85 - risk free rate)/standard deviation = (7.85 - 3.1)/0.1 = 47.5 where the risk free rate I take is the current retail 12Mth FD rate

Unit Trust = (10 - 3.1)/8 = 0.8625

So if that is the case, does that mean we should dump everything into SSPN?

The answer is no, because SSPN tax benefit stops at RM 6,000.00 p.a. So it is not enough to accumulate for a child education.

However, SSPN plays a volatility reducing role in your overall portfolio for your child education.

Xuzen