Boosting savings for retirement

VOLUNTARY SCHEME: Najib launches private pension framework for salaried workers and self-employed

Datuk Seri Najib Razak with Securities Commission chairman Datuk Ranjit Singh (fourth from left) and deputy chief executive of Securities Commission Datuk Dr Nik Ramlah Mahmood (third from right) at the launch of the private retirement scheme in Kuala Lumpur yesterday. With them are board members of the Private Pension Administrator. Pic by Aizuddin Saad

KUALA LUMPUR: PRIME Minister Datuk Seri Najib Razak yesterday launched the private pension framework to help salaried workers and the selfemployed have enough savings for their retirement.

He said the move marked an important step in developing a comprehensive multi-pillar retirement framework for the country. Voluntary private pension scheme, the third pillar in the retirement framework and part of crucial national pension reforms, will enable workers to save beyond their contributions to the Employees Provident Fund and other mandatory pension schemes.

The first set of schemes, comprising 24 funds offered by eight Private Retirement Scheme (PRS) providers, has been approved by the Securities Commission. The funds will be available to the public in September. PRS allows people who are EPF contributors to save more for their golden years while giving those not on the EPF scheme, such as hawkers and petty traders, a way to ensure their retirement savings are properly managed.

“PRS offers opportunities for the people. For individuals, it provides savings for career mobility while for employers, PRS may be used for retaining and attracting talent,” Najib said.

Najib, who is also finance minister, said this at the launch of the Private Pension Administrator and Private Retirement Schemes. “My fervent wish is to ensure that each and every one of our young productive adults and, indeed, the future generations of Malaysians after them will have enough savings and financial assets to enjoy their retirement to the fullest.”

He said the increase of the average life expectancy of Malaysians to 80 years meant that Malaysians, as savvy consumers, must do more to save.

“It means our future generation will live 20 years more after retirement.” Many who contributed to EPF realise that their savings could not last more than three years on average after their retirement, thus, causing hardship to those who want to sustain their lifestyle.

Najib said the private pension scheme was a prerequisite as a country developed economically. “A high-income nation must have a sound and sustainable social framework to ensure adequate retirement savings. This involves the public and private sectors’ participation to ensure the nation is prepared for the challenges of an ageing population.”

The eight PRS providers are AmInvestment Management, American International Assurance, CIMB-Principal Asset Management, Hwang Investment Management, ING Funds, Manulife Unit Trust, Public Mutual and RHB Investment Management.

To encourage people to save, Najib said those who contributed to PRS would enjoy income tax relief of up to RM3,000.   Employers would be given tax deductions for contributions above the statutory rate of up to 19 per cent of the employees' remuneration, he added.

   "I urge employers to use PRS to offer  more attractive remuneration packages in the form of higher contributions to their workers' retirement benefits, while giving their workers the freedom to decide on the type of scheme they wish to participate in."

Earlier, Securities Commission chairman Datuk Ranjit Ajit Singh  said: "Although Malaysia has laid a strong foundation for a multi-pillar pension system, the challenges of pension reform remain without a voluntary system in place.
"It is hoped  PRS will address the gaps and provide an alternative platform for  retirement savings to complement the existing system."