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 Private Retirement Scheme Started?

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ronnie
post Nov 23 2012, 09:25 AM

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QUOTE(smartinvestor01 @ Nov 22 2012, 05:36 PM)
Well, basically from my point of view, PRS is not much different than a normal Regular Monthly Investment in Unit Trust..

The introduction of PRS is more like an effort by the government to enhance the unit trust market or to encourage the citizens to invest in unit trusts..

Therefore, i see nothing interesting in it, rather than just a feeling of frustration because it is like introducing a new version of unit trust.. Noting new...
*
At least we get TAX RELIEF up to RM3000 from YA2012 to YA2021
kino318
post Nov 23 2012, 04:33 PM

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PPA do thing but yearly get RM8 fr each PRS members and 0.04% of the fund NAV. KNS.
ronnie
post Nov 24 2012, 12:12 AM

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You mean we need to pay RM8 annually to maintain PRS account ?
jutamind
post Nov 24 2012, 03:41 PM

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anyone has the disclosure agreement for public mutual PRS? or the web site for PM PRS?
SUSDavid83
post Nov 24 2012, 03:43 PM

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QUOTE(ronnie @ Nov 24 2012, 12:12 AM)
You mean we need to pay RM8 annually to maintain PRS account ?
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Yes.

Read the brochure: http://www.ppa.my/wp-content/uploads/2012/...ewbookletBI.pdf
creativ
post Nov 29 2012, 10:47 AM

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QUOTE(smartinvestor01 @ Nov 22 2012, 05:36 PM)
Well, basically from my point of view, PRS is not much different than a normal Regular Monthly Investment in Unit Trust..
The introduction of PRS is more like an effort by the government to enhance the unit trust market or to encourage the citizens to invest in unit trusts..
I Agree.

QUOTE(smartinvestor01 @ Nov 22 2012, 05:36 PM)
Therefore, i see nothing interesting in it, rather than just a feeling of frustration because it is like introducing a new version of unit trust.. Noting new...
*
I don't agree.

There is actually something new. Tax relief for 10 years, and if compounded annually until you're 55, the annualized return rate will cover the Management Expense Ratio (1.5%) and Sales Load (3%).

In other words, PRS is Unit Trust without fees thumbup.gif ! (and without liquidity sad.gif )

A smart investor will know that fund fees is the number 1 drag to your long term fund return relative to the market returns.

I have done the calculations. You can download the excel spreadheet --> Download Excel Spreadsheet from this Post

Example scenario:

If I'm 35 years old, and my tax rate is 26%. I contribute RM 3000 for 10 years (only) to take advantage of the tax relief.

Assuming the PRS fund has 0% returns (that means no profit, no loss), then my Annual Compounded Interest is 1.95% until 55 years old. This is enough to cover for the "Yearly" Management Expense Ratio (1.5% of your total fund value) and Sales "Front" Load (3%).

CODE

Age Year   Fund Contribution Fund          Fund Value  Income Tax  Income Tax      Total Return
          Amount            Return        (Year-End)  Rate        Relief Amount   Rate (Ann.)
                            Rate (Ann.)
35  2012   $3,000            0.0%          $3,000.00   26.0%       $780            35.02%
36  2013   $3,000            0.0%          $6,000.00   26.0%       $780            21.81%
37  2014   $3,000            0.0%          $9,000.00   26.0%       $780            15.82%
38  2015   $3,000            0.0%          $12,000.00  26.0%       $780            12.41%
39  2016   $3,000            0.0%          $15,000.00  26.0%       $780            10.20%
40  2017   $3,000            0.0%          $18,000.00  26.0%       $780            8.66%
41  2018   $3,000            0.0%          $21,000.00  26.0%       $780            7.53%
42  2019   $3,000            0.0%          $24,000.00  26.0%       $780            6.66%
43  2020   $3,000            0.0%          $27,000.00  26.0%       $780            5.96%
44  2021   $3,000            0.0%          $30,000.00  26.0%       $780            5.40%
45  2022   $-                0.0%          $30,000.00  0.0%        $-              4.60%
46  2023   $-                0.0%          $30,000.00  0.0%        $-              4.01%
47  2024   $-                0.0%          $30,000.00  0.0%        $-              3.54%
48  2025   $-                0.0%          $30,000.00  0.0%        $-              3.17%
49  2026   $-                0.0%          $30,000.00  0.0%        $-              2.87%
50  2027   $-                0.0%          $30,000.00  0.0%        $-              2.63%
51  2028   $-                0.0%          $30,000.00  0.0%        $-              2.42%
52  2029   $-                0.0%          $30,000.00  0.0%        $-              2.24%
53  2030   $-                0.0%          $30,000.00  0.0%        $-              2.08%
54  2031   $-                0.0%          $30,000.00  0.0%        $-              1.95% <--- Result
55  2032


This post has been edited by creativ: Nov 29 2012, 10:54 AM
yong417
post Nov 29 2012, 01:46 PM

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QUOTE(creativ @ Nov 29 2012, 10:47 AM)
I Agree.
I don't agree.

There is actually something new. Tax relief for 10 years, and if compounded annually until you're 55, the annualized return rate will cover the Management Expense Ratio (1.5%) and Sales Load (3%).

In other words, PRS is Unit Trust without fees  thumbup.gif ! (and without liquidity  sad.gif  )

A smart investor will know that fund fees is the number 1 drag to your long term fund return relative to the market returns.

I have done the calculations. You can download the excel spreadheet --> Download Excel Spreadsheet from this Post

Example scenario:

If I'm 35 years old, and my tax rate is 26%. I contribute RM 3000 for 10 years (only) to take advantage of the tax relief.

Assuming the PRS fund has 0% returns (that means no profit, no loss), then my Annual Compounded Interest is 1.95% until 55 years old. This is enough to cover for the "Yearly" Management Expense Ratio (1.5% of your total fund value) and Sales "Front" Load (3%).

CODE

Age Year   Fund Contribution Fund          Fund Value  Income Tax  Income Tax      Total Return
          Amount            Return        (Year-End)  Rate        Relief Amount   Rate (Ann.)
                            Rate (Ann.)
35  2012   $3,000            0.0%          $3,000.00   26.0%       $780            35.02%
36  2013   $3,000            0.0%          $6,000.00   26.0%       $780            21.81%
37  2014   $3,000            0.0%          $9,000.00   26.0%       $780            15.82%
38  2015   $3,000            0.0%          $12,000.00  26.0%       $780            12.41%
39  2016   $3,000            0.0%          $15,000.00  26.0%       $780            10.20%
40  2017   $3,000            0.0%          $18,000.00  26.0%       $780            8.66%
41  2018   $3,000            0.0%          $21,000.00  26.0%       $780            7.53%
42  2019   $3,000            0.0%          $24,000.00  26.0%       $780            6.66%
43  2020   $3,000            0.0%          $27,000.00  26.0%       $780            5.96%
44  2021   $3,000            0.0%          $30,000.00  26.0%       $780            5.40%
45  2022   $-                0.0%          $30,000.00  0.0%        $-              4.60%
46  2023   $-                0.0%          $30,000.00  0.0%        $-              4.01%
47  2024   $-                0.0%          $30,000.00  0.0%        $-              3.54%
48  2025   $-                0.0%          $30,000.00  0.0%        $-              3.17%
49  2026   $-                0.0%          $30,000.00  0.0%        $-              2.87%
50  2027   $-                0.0%          $30,000.00  0.0%        $-              2.63%
51  2028   $-                0.0%          $30,000.00  0.0%        $-              2.42%
52  2029   $-                0.0%          $30,000.00  0.0%        $-              2.24%
53  2030   $-                0.0%          $30,000.00  0.0%        $-              2.08%
54  2031   $-                0.0%          $30,000.00  0.0%        $-              1.95% <--- Result
55  2032

*
just wondering, how many ppl @ 35 years old pay tax @ 26%? unsure.gif
(i.e. annual income > 100k or approx 9k per mth)
gark
post Nov 29 2012, 01:58 PM

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QUOTE(yong417 @ Nov 29 2012, 01:46 PM)
just wondering, how many ppl @ 35 years old pay tax @ 26%?  unsure.gif
(i.e. annual income > 100k or approx 9k per mth)
*
Nowadays is much more common than you think.. mid level managers (~10-15 years experience) working in KL MNC can easily hit that amount....

This post has been edited by gark: Nov 29 2012, 01:59 PM
ronnie
post Nov 29 2012, 02:12 PM

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QUOTE(yong417 @ Nov 29 2012, 01:46 PM)
just wondering, how many ppl @ 35 years old pay tax @ 26%?  unsure.gif
(i.e. annual income > 100k or approx 9k per mth)
*
Also Year-end Bonus is taxable...
xuzen
post Nov 29 2012, 03:00 PM

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QUOTE(yong417 @ Nov 29 2012, 01:46 PM)
just wondering, how many ppl @ 35 years old pay tax @ 26%?  unsure.gif
(i.e. annual income > 100k or approx 9k per mth)
*
Off my mind, I recall reading somewhere that around 1.5% of Malaysian citizen pays the highest tier tax, i.e 29 million x 1.5% = 435,000 tax-payers

This PRS scheme is only as good as the tax relief. I won't be surprise, financially savvy contributors will not put more than RM 3,000.00 p.a.

Once the tax relief is gone, the whole PRS scheme will be redundant.

Xuzen
lowyat101
post Nov 29 2012, 04:51 PM

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Read in The Star last Sunday that quite a number of funds have been approved. May I know which of them already start 'selling' the scheme? And any recommendation which one shall I go for?
yong417
post Nov 29 2012, 09:07 PM

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QUOTE(gark @ Nov 29 2012, 01:58 PM)
Nowadays is much more common than you think.. mid level managers (~10-15 years experience) working in KL MNC can easily hit that amount....
*
QUOTE(ronnie @ Nov 29 2012, 02:12 PM)
Also Year-end Bonus is taxable...
*
if i not remember wrongly, our per capita income is abt 28k p.a.

the illustration of the 1.95% seems only for a small group of ppl.
echoesian
post Nov 30 2012, 12:50 AM

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QUOTE(creativ @ Nov 29 2012, 10:47 AM)
I Agree.
I don't agree.

There is actually something new. Tax relief for 10 years, and if compounded annually until you're 55, the annualized return rate will cover the Management Expense Ratio (1.5%) and Sales Load (3%).

In other words, PRS is Unit Trust without fees  thumbup.gif ! (and without liquidity  sad.gif  )

A smart investor will know that fund fees is the number 1 drag to your long term fund return relative to the market returns.

I have done the calculations. You can download the excel spreadheet --> Download Excel Spreadsheet from this Post

Example scenario:

If I'm 35 years old, and my tax rate is 26%. I contribute RM 3000 for 10 years (only) to take advantage of the tax relief.

Assuming the PRS fund has 0% returns (that means no profit, no loss), then my Annual Compounded Interest is 1.95% until 55 years old. This is enough to cover for the "Yearly" Management Expense Ratio (1.5% of your total fund value) and Sales "Front" Load (3%).

CODE

Age Year   Fund Contribution Fund          Fund Value  Income Tax  Income Tax      Total Return
          Amount            Return        (Year-End)  Rate        Relief Amount   Rate (Ann.)
                            Rate (Ann.)
35  2012   $3,000            0.0%          $3,000.00   26.0%       $780            35.02%
36  2013   $3,000            0.0%          $6,000.00   26.0%       $780            21.81%
37  2014   $3,000            0.0%          $9,000.00   26.0%       $780            15.82%
38  2015   $3,000            0.0%          $12,000.00  26.0%       $780            12.41%
39  2016   $3,000            0.0%          $15,000.00  26.0%       $780            10.20%
40  2017   $3,000            0.0%          $18,000.00  26.0%       $780            8.66%
41  2018   $3,000            0.0%          $21,000.00  26.0%       $780            7.53%
42  2019   $3,000            0.0%          $24,000.00  26.0%       $780            6.66%
43  2020   $3,000            0.0%          $27,000.00  26.0%       $780            5.96%
44  2021   $3,000            0.0%          $30,000.00  26.0%       $780            5.40%
45  2022   $-                0.0%          $30,000.00  0.0%        $-              4.60%
46  2023   $-                0.0%          $30,000.00  0.0%        $-              4.01%
47  2024   $-                0.0%          $30,000.00  0.0%        $-              3.54%
48  2025   $-                0.0%          $30,000.00  0.0%        $-              3.17%
49  2026   $-                0.0%          $30,000.00  0.0%        $-              2.87%
50  2027   $-                0.0%          $30,000.00  0.0%        $-              2.63%
51  2028   $-                0.0%          $30,000.00  0.0%        $-              2.42%
52  2029   $-                0.0%          $30,000.00  0.0%        $-              2.24%
53  2030   $-                0.0%          $30,000.00  0.0%        $-              2.08%
54  2031   $-                0.0%          $30,000.00  0.0%        $-              1.95% <--- Result
55  2032

*
You won't be getting tax relief if bringing the previous balance forward.
ronnie
post Nov 30 2012, 07:25 AM

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QUOTE(echoesian @ Nov 30 2012, 12:50 AM)
You won't be getting tax relief if bringing the previous balance forward.
*
The example shows you contribute RM3000 every year for 10 years lah doh.gif
creativ
post Nov 30 2012, 09:16 AM

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QUOTE(yong417 @ Nov 29 2012, 09:07 PM)
the illustration of the 1.95% seems only for a small group of ppl.
*
yong417,

That's why I shared the excel for download. When you personalize the values in the excel sheet, you will know if it is worth it to you or not.

Two factors which will affect your annualized return:

1. The older you are, the higher your annualized return rate when you reach 55.
2. The higher your tax rate, the higher your annualized return rate when you reach 55

Having said the above, I'm not advocating that you start investing in PRS in your later years. It is never to late to start investing. The earlier you start, the better due the the compounding effect of interest. Investing early also lowers risk, because you have time on your side.

Added on November 30, 2012, 10:51 am
QUOTE(xuzen @ Nov 29 2012, 03:00 PM)
This PRS scheme is only as good as the tax relief. I won't be surprise, financially savvy contributors will not put more than RM 3,000.00 p.a.
Exactly!

QUOTE(xuzen @ Nov 29 2012, 03:00 PM)
Once the tax relief is gone, the whole PRS scheme will be redundant.
*
You're right. I'm predicting the PRS scheme financially savvy, young, new contributors will start falling out the closer we are to year 2021.

I'm also hoping the government will extend the tax relief beyond 2021, if they genuinely wants to encourage the rakyat to save for retirement. (Please don't bring politics into this thread)

This post has been edited by creativ: Nov 30 2012, 10:59 AM
mars1069
post Nov 30 2012, 04:11 PM

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Hi, are the insurance's Annuity plan & PRS different products that entitle tax relief RM3K each (RM6K if got both) or just one of them is entitled for 3K tax relief? Confuse la...Thanks.
maldini
post Nov 30 2012, 04:57 PM

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QUOTE(xuzen @ Nov 29 2012, 03:00 PM)
Off my mind, I recall reading somewhere that around 1.5% of Malaysian citizen pays the highest tier tax, i.e 29 million x 1.5% = 435,000 tax-payers

This PRS scheme is only as good as the tax relief. I won't be surprise, financially savvy contributors will not put more than RM 3,000.00 p.a.

Once the tax relief is gone, the whole PRS scheme will be redundant.

Xuzen
*
lesser than that, 11 millions workers (not entire population) = 1.5% = 165,000
echoesian
post Nov 30 2012, 08:48 PM

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QUOTE(mars1069 @ Nov 30 2012, 04:11 PM)
Hi, are the insurance's Annuity plan & PRS different products that entitle tax relief RM3K each (RM6K if got both) or just one of them is entitled for 3K tax relief? Confuse la...Thanks.
*
Both annuity and PRS share the same 3k tax relief
tansling
post Nov 30 2012, 10:10 PM

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As long as your monthly income is more than RM4K, you will benefit from PRS RM3K tax relief.
creativ
post Dec 4 2012, 10:18 AM

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Has anybody gone on-board PRS already? If yes, which Fund House have you chosen?

We only have a couple of weeks left to catch the 2012 boat.
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