PRS = regular savings plan. (closest icon I can find, actually looking for pengsan.)

1. PRS vs. Unit trusts.
The income distributions (if any) in PRS are tax exempted.

2. PRS vs. EPF.
There are statements that both allow tax deductions on contributions by employer (up to 19%, combining both PRS and EPF, of the employee's salary). But silent on whether the employer's contribution into PRS is considered non-income to the employee, unlike EPF.

It is also best to keep in mind that it is possible to switch between providers as well as between funds within the same provider. There might be some switching or transfer fees, and in the case of Public Mutual zero fees within their PRS funds.

So it is cheaper than the normal unit trusts if we were to switch to better funds, within or out to another provider, and don't have to pay sales charges (if any) again.

Should check out the PPA.my site http://www.ppa.my/index.php/providers-and-...proved-schemes/ for more info...

(I see why PM agents may not be happy, sales charge for their PRS is 3% vs 5.5% for their equity unit trusts.)

Yes, no sales charge is a big plus. All these funds are new, so can't say how they will perform compare to the normal unit trust funds, but they have an advantage since their income distributions is tax exempted; especially if the income is from within Malaysia - which most of the approved funds are.

But take note that funds which incomes from bonds are non taxable too. Aggressive funds with higher percentage in equities will have more advantage on this tax exemption on income distributions.

As for the tax relief, it is a plus factor, but I would not consider it a major factor in deciding between PRS and UT, since 3k savings in a year is not a lot when you're in a higher tax bracket and paying more than 10k in income tax.

The zero switching fees within same provider and possible to switch between providers is very attractive. Since this scheme is for retirement, the 'investment' could slowly increase to high figures in 10-15 years... this is when you would want to monitor the fund more closely and do some switching instead of allowing your money to slide down in a bearish downturn. No doubt all the funds will slide downwards, but the more conservative funds will slide lesser.

Aside from the differences between PRS and EPF in earlier posts, the timing of 'investments' in EPF is quite irrelevant. EPF is comparable to a fixed price unit trust fund like ASB, where the price is fixed; and the dividend paid for the past year is pro-rata to the date you 'buy' in.

PRS will be similar to unit trusts with fluctuating prices. All the management and trustee fees will have been priced into the price. (Management fee should not be a major consideration except in comparing different PRS and their performances.) Dividend paid will be converted into more units; and which in turn will lower the unit price. Thus the actual rate of returns is depended on the price you have had 'invested' in and the price when you make a withdrawal.

Another major difference from EPF and any other fixed price unit trust fund is how they are mandated.

A fluctuating price unit trust is usually mandated to have at least some percentage in equities, with the rest in bonds, fixed deposits, etc. They cannot lock in any gains and exit completely from the equity market.

A worst case scenario: the next 10 years could be a “golden decade” followed by a decade of decline in the economy and stock market... you could be buying in at the peak prices and making withdrawals for retirement when the prices is at or near the bottom.

This post has been edited by j.passing.by: Dec 19 2012, 03:31 PM

The management & trustee fee is a pretty much hidden cost; since it is already incorporated into the price.

It has no bearings on the performance of the fund. Paying more does not mean better fund management; and conversely, paying a cheaper management fee does not mean that the returns will be better.

It is not right to assume that there is a savings of x amount of ringgit in A since the management fee of A is lower than B. First of all, it is already incorporated into the price and you're not paying any extra amount out of the pocket if you were to invest with B.

It is similar to coming to a conclusion that we will save the entire management & trustee fee if we don't invest at all.

It should only comes into question when there is a really huge difference between the fees; a huge difference such that it would impact the returns significantly. I guess this would be for the the PPA to administer...