PRS Youth Incentive: Utilize FREE RM1K to Grow RM2K into RM56K*

In this post, I will be sharing on PRS Youth Incentive and why eligible Malaysian youth should grab the FREE RM1,000 latest by 31 December 2018.

This post includes the short term and long term benefits of joining PRS Youth Incentives. Among them is to use an online calculator to see how you can grow your investment of RM2,000 into a substantial amount.

I will also be sharing how to enrol for PRS Youth either through registered PRS consultants or online.

Towards the end of this article, you will find some important notes related to PRS Youth Incentive.

What is PRS Youth Incentive?

I believe by now, you should know what is PRS (Private Retirement Fund).

If you are unsure about it, you can read more about PRS on Private Pension Administrator (PPA) website. PPA is an independent, central administrator that provides services for PRS members. PPA is approved by the Securities Commission Malaysia.

Basically, PRS is a long-term investment scheme designed to assist individuals to accumulate savings for retirement.

Unlike EPF (Employees Provident Fund), PRS is voluntary.

It is an effort introduced by the Malaysian government in July 2012 to help Malaysians to save more and better prepare for retirement.

PRS Youth Incentive was later announced in Budget 2014 for the period of 2014-2016.

Where PRS members aged 20-30 years old were eligible to receive a one-off payment of RM500 from the Malaysian government, provided they invested a minimum of RM1000 in their PRS account earlier.

The PRS Youth Incentive was further enhanced in Budget 2017 for the period of 2017-2108.

In this round, the government doubled the incentive from RM500 to RM1000. 

This means that if you are a Malaysian youth and you meet the requirements below, you are eligible for the RM1000 incentive:

• between the age of 20 to 30 years old before 31 Dec 2018
• you have invested a gross minimum of RM1000 in a single PRS fund provider between 2017 to 2018

The main purpose of the PRS Youth Incentive is to encourage young Malaysians to start their retirement savings early.

By the way, if you are an existing PRS member who had qualified for the RM500 PRS Youth Incentive during the period of 2014 to 2016, you are not qualified to receive the RM1,000 PRS Youth Incentive.

Benefits of joining PRS Youth Incentive

So, why should Malaysian youth join PRS Youth Incentive?

For this question, read about the benefits of joining the PRS Youth Incentive below:

1. Free Incentive of RM1000 from the Malaysian government

Malaysian youth who is currently between the age of 20 to 30 years old, should not miss out on this opportunity of receiving an incentive of RM1,000 in PRS unit from the government.

Once PPA had verified that the youth is eligible for the incentive, PPA will notify the government for payout to qualified individuals.

This is the immediate benefit gained. It is just like you are receiving a big angpao from the government.

2. Longer time frame to grow your investment

When you enrol for PRS in your youth, you have a longer time frame for better returns on investment. Compared to enrolling for PRS later in your working years, there can be a huge difference in total savings accumulated.

You can refer to my calculation and explanation below on the impact of the number of years on the total amount accumulated.

This would be your long-term benefit.

Why Malaysian youth should grab this opportunity?

We all know the importance of saving up sufficient funds for a comfortable retirement.

It is just so hard to start.

But, what if you get amazing returns from that tough decision you made today? Those amazing returns are because of the power of compounding interest.

Let’s say you already meet the criteria required to be eligible for the PRS Youth incentive of RM1,000 PRS units. Refer to the print screens below on how much you can save by the time you reach the retirement age of 55 years old.

Scenario A

• Your total principal is RM2,000 (RM1,000 from your own investment and RM1,000 from PRS Youth Incentive)
• Currently, you are 20 years old so you have another 35 years before retirement
• You didn’t make an additional contribution throughout the 35 years
• You didn’t make any withdrawal throughout the 35 years
• The estimated Interest Rate is 10%

See, you can grow that RM2,000 into RM56,204.87.

Scenario B

• Your total principal is RM2,000 (RM1,000 from your own investment and RM1,000 from PRS Youth Incentive)
• Currently, you are 30 years old so you have another 25 years before retirement
• You make an additional contribution of RM100 monthly or RM1200 annually throughout the 25 years
• You didn’t make any withdrawal throughout the 25 years
• The estimated Interest Rate is 10%

Now, maybe you’ve started PRS a bit late than your younger brother who is 10 years younger than you.

But, with the additional contribution of just RM100 monthly or RM1,200 annually, your estimated future value at retirement can be almost three times what your younger brother has.

Again, can you see the magical power of compounding interest?

Factors affecting the future value of PRS investment

The above are just two simple scenarios.

But of course, the future value depends heavily on the interest rate, which is not something that is within our control.

It is an estimation. It can be lower or much higher than 10%.

The other factor which you can control is whether you make an additional contribution to your investment. As you can see above, additional contribution greatly affects the final future value.

Another factor is your current age. Or how many years you have before retirement. In other words, the number of years your money can do the magic work of compounding interest.

That’s why you should invest as early as possible. The earlier you started your investment, the more you will be able to accumulate.

The last factor is the amount of your current principal.

If you can afford to invest more in PRS, you will directly grow your retirement fund into a bigger amount.

There are many free compound interest calculators out there. As you can see from the print screens above, I am using a compound interest calculator from Moneychimp.

You can try it out yourself and play around with the 4 variables to see how these variables affect your final future value.

Do remember to relate the ‘Years to grow’ to your own age when you try out the compound interests calculator. Because the earlier you start your investment, the more years you have to grow your retirement fund.

So, why not take up this opportunity to grab the free RM1,000 PRS units from the government and start growing your retirement fund now?

How to sign up for PRS Youth Incentive?

There are two ways to enrol for PRS Youth.

The first is signing up through registered PRS consultants from eight providers nationwide.

You can refer to the list of the PRS providers on the PPA website. 

For your information, my PRS consultant is from Manulife. I like her professionalism in providing financial advice and she’s not the pushy type. In case you wish to have her contact, feel free to email me or drop me a message below.

The other way to sign up for PRS Youth Incentive is through PRS online enrolment. An individual interested to sign up through PRS Online Enrolment must do so latest by 23 December 2018.

Personally, I have no experience signing up for PRS online because I enrolled on PRS in 2013. PRS online enrollment only started in early 2018.

But, based on my recent experience of using PRS online to make additional PRS contributions, I believe it is quite simple and you can do it yourself at your own convenience.

If you need further assistance, feel free to call PPA at 1300 131 772 or email PPA at [email protected].

Before you perform the PRS online enrolment, please ensure you have your online banking ready. Because based on my experience of using PRS Online to top up my contribution, the payment only accepts a PRS account holder’s name. This means that third-party transaction is not allowed.

This means that the PRS account holder and the online banking account holder must be the same person. Else, the transaction will be rejected.

Benefits of joining PRS Youth through PRS Online

And these are the benefits of joining PRS Youth through PRS Online:

1. Waiver of RM10.00 for PPA account opening

PPA shared that for all online applications through PRS Online Enrolment, the PPA account opening fee of RM10.00 shall be waived until further notice.

I do remember that I paid my PRS consultant RM10.00 to open my PPA account in 2013.

So, you save RM10.00 if you sign up for PRS through PRS Online Enrolment.

You can find this statement on the PPA website. It is stated on the second item under the Term & Conditions of PRS Online Enrolment.

2. PRS providers’ sale charge at 0%

On the same Term & Conditions of PRS Online Enrolment page, it also stated that, for applicants age 30 and below who perform self-enrollment, PRS Providers’ sales charge will be at 0%.

See, you gain more savings and get to have more PRS units when there is a 0% sales charge.

3. Convenience

Needless to say, it is very convenient when you can perform the enrolment yourself at your own convenience.

It saves you time and is hassle-free too.

Additional notes

1. An eligible individual has until 31 December 2018 to reap the incentive of RM1,000 PRS units. So, if you’ve decided to enrol, do enrol early. To ensure a smooth procedure, it is advisable not to wait until the last minute.
2. If you feel you have no knowledge of PRS, it is recommended to get advice from registered PRS consultants.
3. There are risks in all investments, including PRS. It is advisable to read and understand all about PRS before you enrol. You can read more details on PRS at the PPA website.
4. Currently, PPA is having PRS Online Enrolment Treat from 1 October until 15 December 2018. If you enrol through PRS Online before 15 December 2018, you are eligible for the treat below:
   i)  For new enrollees, every 10th person to enrol will receive RM100 in PRS units.
   ii) For existing PRS members, every 10th member to refer a new enrollee will receive RM100 in PRS units.
5. PRS members who make contributions to PRS enjoy tax relief up to RM3,000 per year. This tax incentive is available until the year 2025. The tax incentive is only applicable to contributions made by PRS members. This means that the RM1,000 from PRS Youth Incentive is not eligible for the RM3,000 tax relief.
6. This sharing is purely based on my own opinion. I tried to be as accurate as possible. If there is an error or amendment needed, please share your opinion and leave a comment at the end of this article.

Final thoughts

To all eligible Malaysian youth out there, do grab this opportunity for the free RM1,000 PRS units. If you don’t have the RM1,000 to qualify for a gross RM1,000 in a single PRS fund, I suggest you try to ask your parents.

And to all parents of eligible Malaysian youth out there, do encourage your children to grab this opportunity.

Not only for the free RM1,000 PRS units but also to encourage them to start saving young. With the hope that they will retire richer than us.

Lastly, this opportunity end by 31 December 2018. Do sign up early.

It is advisable to sign up before 15 December 2018 to enjoy the PRS Online Enrolment Treat.

*This is an illustration only. Investment involves risks. Invest at your own risk.