Retirement. The word itself may mean a sense of relief and happiness for some people while to others, it may conjure a feeling of discomfort and anxiety. Who hasn’t given a thought about their future and what they may do in their golden years…some people may have dreams about living on a holiday home on the beach, travelling around the world, or just living at home and enjoying the company of family members and other loved ones.
However, there may be some of us who might face the possibility of not having enough money in the bank account, thus facing more years in the workforce or looking at alternative methods to raise funds when we should be enjoying our golden years, relaxing after years of being in the labour market!
A few months ago, we briefly explained the importance of investing and adopting financial habits in your 20s in this article. If you’re a young professional looking to build your nest egg and enjoy a comfortable retirement in your golden years, now is the perfect time to look into the Private Retirement Scheme (PRS) as an investment option for your own retirement dreams!
What is the Private Retirement Scheme?
The Private Retirement Scheme or PRS is a voluntary long-term investment scheme designed to help individuals accumulate savings for retirement. In other words, besides the savings you have in your bank account, PRS aims to help you put aside a bit of your monthly pay cheque into a retirement savings account that is well regulated yet also allows YOU to make a decision on what type of investments you’d like to put your money in, based on your own retirement needs, goals and risk appetite.
Why should I invest in PRS?
Are you working in the private sector and contributing regularly to the Employees Provident Fund (EPF)? Or are you working in the government sector and at the end of your tenure, you’ll be expecting a nice pension to tide you over after you stop working?
According to the EPF, nearly 80% of EPF contributors in Malaysia will not have enough savings in their EPF to live above the poverty line, which is currently calculated at RM830 per month. This is why an investment portfolio like the PRS is crucial to complement one’s EPF or pension fund as it allows the contributor to invest a small portion of their monthly salary into a fund based on their age group.
Rise in the Cost of Living
You may have heard from your parents or young grandparents’ stories about the good old days and how during their childhood or young adult years, they could spend less than a ringgit for a decent nasi ayam meal. Due to inflation and the growing economy over the years, the price of goods and services have also increased, tripling the price of that same nasi ayam meal in today’s currency. This means the young adults in their 20s and 30s will also face an imminent rise in their standard of living and may see an increase in price for goods and services in the future. Something that may cost RM10 for a bottle of shampoo might be RM20 or RM30 in a few year’s time.
Benefits of the PRS
As a supplementary retirement account, the PRS is a complement to the rise in the standard of living and rising healthcare costs, and doesn’t act as a substitute to the EPF or pension. PRS contributors are encouraged to make regular monthly contributions to enjoy compound annual growth rate to reach their investment goal.
You’re also allowed to make partial withdrawals before the age of 55 for your pre-retirement needs once a year1 or full withdrawal upon reaching retirement age, or certain circumstances such as emigration (permanently living abroad) and death.
We’ve highlighted some important features of the PRS that can help you save money when you open an account:
The types of funds offered by AmInvest
AmInvest, the funds management arm for AmBank Group offers the AmInvest PRS Scheme which consists of nine funds based on your retirement needs, goals and risk tolerance. They are listed in two categories – core funds and non-core funds.
Generally, higher risk investment gives us the possibility of higher returns. The image below illustrates the range of PRS funds offered by AmInvest based on potential risks and returns.
AmInvest Core funds
AmInvest offers PRS core funds or “default options” for those of you who are impartial, AmInvest shall assist by placing your investment into one of the Core funds based on your age group.
A summary about these Core funds can be found in the table below:
Build your own portfolio with Non-Core Funds!
AmInvest offers the most diverse range of non-core retirement funds in the market! They are for those of you who wish to take a more active role in managing your own portfolio. These funds are illustrated in Diagram 1 above.
For example, AmPRS- Asia Pacific REITs offers the benefits of real estate ownership in the Asia Pacific region without the headaches or expense of being a landlord! In our next article, we will share with you how you can take control of your investments by picking one or more funds to suit your investment goals.
More information about the AmInvest PRS funds can be found on the AmInvest website.
Empowering your money with AmInvest
Here’s why you should consider placing your money with AmInvest PRS funds:
Reminder: If you’re between the age of 20-30, the government is giving away a one-off incentive of RM500 when you contribute a minimum of RM1,000 in a single year to your PRS fund!1
1 Terms and conditions apply. Source www.ppa.my
2 Asia Asset Management Best of the Best Awards 2015
3 Morningstar (www.morningstar.com). Data extracted 18 April 2016.
4 Based on Lipper Investment Management under Global Lipper Classification: Bond Global (AmPRS-Dynamic Sukuk), Bond Asia Pacific (AmPRS-Tactical Bond) and Equity Sector Real Estate Asia Pacific (AmPRS-Asia Pacific REITs). Data extracted 12 April 2016.
Opening an Account
Ready to open an account and start the path to saving for a comfortable retirement? Now’s the time to open your account by following these steps:
If you're interested in opening an account with us, just fill in this form and we'll get in contact with you shortly!
Check out our infographic, created in partnership with SaveMoney.my, and consider an investment fund that’s tailored to your needs!
For more details about the infographic, visit https://savemoney.my/personal-finance/private-retirement-scheme-funds-built-just-for-you-infographic...
Teaser image via source. Parrot image via PPA.com.my and DividendMagic.com.my
DISCLAIMER - The information contained in this Article is general information only and does not take into account your individual objectives, financial situations or needs. You should seek your own financial advice from an appropriately licensed adviser before investing. You should be aware that investments in private retirement scheme carry risks. An outline of some of the risks is contained in the Replacement Disclosure Document for AmPRS dated 1 December 2014 and Second Supplementary Disclosure Document dated 10 September 2015 ("Disclosure Documents"). Refer to the Disclosure Documents for detailed information of the specific risks for the Funds. Unit prices and income distribution, if any, may rise or fall. Past performance of a fund is not indicative of future performance. Please consider the fees and charges involved before investing. Units will be issued upon receipt of completed application form accompanying the Disclosure Documents and subject to terms and conditions therein. You have the right to request for a copy of Product Highlights Sheet for the funds. You are advised to read and understand the contents of the Product Highlights Sheet and Disclosure Documents before making an investment decision. The Disclosure Documents have been registered with Securities Commission Malaysia, who takes no responsibility for its contents. You can obtain a copy of the Product Highlights Sheet and Disclosure Document, from any of our representative offices and authorized distributor. AmFunds Management Berhad does not guarantee any returns on the investments. In the event of any dispute or ambiguity arising out of the other language translation in this material, the English version shall prevail.
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