RETIREMENT GOVERNMENT GDP
Malaysia – The new Private Retirement Scheme (PRS) will help workers not eligible for the Employees Provident Fund (EPF) save up for their old age.
The PRS is open to employees above the age of 18 to help them prepare for retirement through better management of their savings. This was first proposed by the government under the Capital Market Masterplan 2.
“The PRS framework comprises approved PRS providers (eight for now), each offering a range of funds and investment options, where the assets put in by the contributors will then be segregated and held by independent trustees to the private retirement schemes (Scheme Trustees) under a trust,” a Securities Commission (SC) spokesperson said. The SC has been tasked to review the current retirement landscape and will make suggestions to improve the system, The Star reported.
The PRS will also allow workers already covered under the mandatory EPF scheme another avenue to save for their future.
The Private Pension Administrator will be set up to provide an administration framework for the growth and operation of the PRS, and will be responsible for facilitating and maintaining all PRS-related transactions made by contributors and members.
Dr Yeah Kim Leng, chief economist at RAM Consultancy Services, said the introduction of PRS is timely given the growing size of the EPF's portfolio.
“Besides relieving pressure on the EPF management, the PRS will help to mitigate over-concentration of investment funds in a single entity. It will add another layer of depth and liquidity to improve the efficiency of the markets,” he said.
Azrul Azwar, Bank Islam Malaysia’s chief economist, added the PRS will help towards increasing the size of Malaysia's capital market. Currently stock market capitalisation and outstanding debt securities have gone up from RM2 trillion (S$8.1 billion) in 2010 to RM4.5 trillion (S$1.8 trillion), based on the forecasted 6.5% GPD growth for Malaysia by 2020.
“As such, this phenomenon should help increase the share of the financial sub-sector as part of the larger services sector, which in turn will contribute towards enlarging the services sector to account for more than 70% of GDP by 2020,” Azrul said.
“Malaysia will increasingly become a service-oriented nation instead of a manufacturing hub or a commodity-based centre.”
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