PRS Youth Incentive
In the 2014 Budget tabled on 25 October 2013, the Prime Minister had announced youth incentive of RM500 to contributors who participate in the PRS scheme to inculcate the importance of saving from an early age to ensure sufficient savings after retirement. The RM500 is a one-off contribution by the Government to young PRS members to encourage youth to undertake long-term savings for retirement through the PRS.
Pursuant to Budget 2017, the incentive amount has been enhanced by the government to RM1,000. The government will contribute RM1,000 per qualified youth to be used to purchase units of PRS funds in the PRS account. To qualify, the youth has to accumulate a minimum gross contribution amount of RM1,000 during a period of two (2) years from 2017-2018.
In order to qualify for the PRS Youth Incentive, the following requirements must be met;
- Individuals must be Malaysian nationals.
- Individuals may be existing PPA account holders or new Members.
- Individuals must be aged 20 and above but have not yet reached the age of 31 between 2017 – 2018.
- Gross contributions reaches RM1,000 during a period of two (2) years from 2017 to 2018 in a single PRS fund of a Provider.
Terms & Conditions
The following 5 conditions apply for the incentive;
- Gross contributions cannot be sourced from employer contributions (whether via vesting schedule or otherwise), only individual contributions are eligible.
- Gross contributions cannot be achieved via transfer from a different Provider, however switching between funds is allowed.
- The RM1,000 incentive is only applicable to PRS contributions made for the period beginning 1 January 2017 to 31 December 2018.
- The minimum contribution amount must be a gross amount of RM1,000 which is inclusive of all fees and charges.
- The RM1,000 must come from a single PRS Fund. If an individual had invested RM500 into a Growth Fund, RM500 into a Moderate Fund and RM500 into a Conservative Fund of the same Provider, he would be excluded from receiving the incentive as he has not met the minimum contribution amount requirement in a single Fund.
Starting Your PRS
To ease your financial burden, you may consider the following;
- Go on regular monthly contribution
- RM1,000 for a two (2) year duration works out to just RM40 a month
- Individuals who start early, between the age of 20 and 30, will have a good 30 to 40 years of saving accumulation and compounding before reaching retirement
Parent Contributing to Youth
Parents of youth whom qualify the age requirement of between 20 – 30 years of age may contribute on behalf of their children. Parents are encouraged to do this to give their youth a head start on their retirement savings. Thereafter, the youth can continue to make regular contributions.
To qualify for the incentive, the individual must have accumulated a minimum gross contribution amount of RM1,000 in a single PRS Fund. In order to qualify, individuals may wish to consider doing a Switching of PRS Funds within the same PRS Provider to consolidate the various funds into a single PRS Fund. When consolidating, individuals are to ensure that the consolidated amount meets the minimum gross contribution amount of RM1,000.
The gross minimum contribution amount achieved by way of a Transfer will be excluded from the incentive.
See FAQ under TRANSFER
PRS Fund Selection Based on PRS Fund Which First Reaches RM1,000 (“First Past The Post” Rule)
PPA will select the fund which first reaches the RM1,000 contribution within a period of 2017-2018. If there are multiple funds and the RM1,000 threshold occurs on the same date, the incentive would be divided equally between the various funds of a single or multiple Provider.
Example of incentive payout
The RM1,000 is a one-off incentive and qualified individuals will only receive it ONCE for the entire period between 2017 to 2018 and not once every year.
Payment will be made on a bi-annual basis and PPA will notify the members once the incentive payout is made into the members’ qualified PRS Fund.
Once an individual is eligible, the RM1,000 will be utilized to purchase units which will then be created in sub-account A of the PRS fund that the Member has contributed the RM1,000. The number of units the Member would receive would depend on the NAV per unit of the PRS fund.
Any transfer occurs after the cut off date but before the incentive is paid to the Member’s account, the member is eligible to receive the incentive.
Individuals do not need to apply for the incentive and no documentation is required from the Member in order to receive the incentive. PPA will monitor the eligible accounts and compile a listing of those qualified and notify the Government of the individuals eligible to receive the incentive. A report is compiled by PPA bi-annually, in order for the pay-out to be made to the qualified individuals. Once eligible, the incentive will be automatically credited into the Member’s sub-account A of the PRS fund.
Members may view the transaction once the notification is given to the members through their PPA Online account. If you do not have a PPA Online account, please contact our Call Centre at 1-300-131 772 or e-mail us at askPPA@ppa.my
Splitting of Incentive Where There are 2 or More PRS Funds which have satisfied the Minimum Gross Contribution Amount
For members who have several PRS Funds, either with a single PRS Provider or multiple Providers, in the event that multiple Funds received the RM1,000 gross contribution on the same date, the Incentive would be divided equally among these Funds. Otherwise, the Fund that received the RM1,000 gross contribution first, will receive the full RM1,000 incentive.
Example of incentive that would be divided equally
Pre-Retirement Withdrawal from Sub-Account B
As the full RM1,000 will be utilized to purchase units which will then be created in sub-account A, this incentive is therefore not available for pre-retirement withdrawal from sub-account B.
However, where pre-retirement withdrawals occur after the cut-off date but before the incentive is paid to the Member’s account, the Member is eligible to receive the incentive.
See FAQ under PRE-RETIREMENT WITHDRAWAL
The RM1,000 incentive will not be subject to PPA’s annual fee and Provider’s sales charge.
Application of Tax Relief on the Youth Incentive
Please note that the one-off incentive of RM1,000 from the Government to qualified contributors is not eligible for the annual RM3,000 tax relief claim as the contribution was not made by the PRS Member in his individual capacity.
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