Retirement Planning in Malaysia – Prepare For Real Relax Life


How you save in your youth will determine how you will live during your golden years. Retirement Savings is something that most people find to be a bit of a challenge. Retirement may seem to be far off in the future especially if you are still in your twenties, but it is necessary to start planning now to make sure that you will have enough to support yourself when you retire.

The high cost of living and increasing inflation has made it essential for everyone to have a retirement plan.

You will be able to enjoy your retirement if you plan well for it

What is Retirement Planning?

Retirement planning simply means allocating funds to use when you retire. It means making plans to live comfortably when you can no longer work to support yourself due to old age. There is also the other non-financial aspect to planning for retirement which involves planning how to spend it, when to retire, where to live, etc.

The best time to start planning for your retirement is the moment you start getting a stable income because the earlier you start, the more funds you will have accumulated by the time you retire at 55years. Some of the most basic needs that you will need to consider when planning your retirement will include a home, money for your everyday expenses, medical bills, and emergencies.

How to Effectively Plan For Retirement

  • Setting your retirement goals– How will you spend your retirement? List down what you want to do when you retire from the most important to the least important. Make sure that your list rules out unnecessary expenses and try to be as specific as possible. When you know and understand your goals, you will be able to determine how much you should save in order to achieve them.
  • Identifying sources of income– that you can completely rely on when you retire. This includes your savings, investments, EPF or Pension, properties or businesses etc. Make a list of all of them and add them up to find out what they will total up to each month.
  • Estimating your expenses– This includes your day to day expenses, loan repayment, rent/mortgage payment etc. Cut the unnecessary expenses so that you can start saving more.
  • Managing your assets– This will require a lot of discipline on your part. You have to make sure that your resources will last as long as you need it and you will not run out of cash in the middle of your retirement.
  • Prepare for the unexpected– Nobody likes to think of anything bad happening to them, but it is always good to be prepared. You would not want to be caught off guard during your retirement. Take your time to think of how you will pay or respond to any issue that may arise- whether minor or major. It doesn’t hurt to have some money set aside for emergencies.

Retirement in Malaysia

Retirement age in Malaysia is currently set at 55 years for employees in both the public and the private sector. A government pension plan is available for employees in the public sector. With this pension plan, retired employees receive a monthly pension which is normally half of their salary. The employees in this sector can also opt to have an Employee Provident Fund retirement plan.

For employees in the private sector, the government policy requires them to set aside a portion of their salary into the Employee Provident Fund (EPF) to make sure that they have enough savings for retirement. This is usually 23% of their monthly income which is credited into their EPF accounts. From this, 12% is contributed by the employer, and 11% by the employee.  The contribution is then placed into two separate accounts- account 1 and 2.

Account 1:- 70% of the monthly contribution which is meant for retirement financing is allocated into this account. The funds can only be withdrawn when the contributor reaches the retirement age of 55years, becomes incapacitated, relocates to another country or dies.

Account 2:- holds the remaining 30% of the monthly contribution. The funds in this account can be used to cover medical expenses, housing loans, financing education etc.  The member should at least be 50 years old to be eligible to withdraw from this account.

Most people in Malaysia solely rely on EPF to plan for their retirement and feel that the money is enough to cater for all their needs when they retire. However, a recent report showed that a majority of households run out of funds after a few years in retirement.

Private Retirement Scheme

This was introduced in 2014 as a supplement of Employee Provident Fund (EPF) when it was discovered that most Malaysian only depend on EPF for their retirement savings which is usually not enough. The PRS is a defined contribution scheme where individuals can accumulate savings retirements.

Who are the PRS Players?

Administrator: – Private Pension Administrator is a body approved by the SC to perform the role of the administration, customer service, and record keeping for the members and contributors of the scheme.

Trustees: – is an independent third party that is responsible for safeguarding the assets of PRS for the contributor.

Providers: – are approved by the Security Commission (SC) to provide the PRS services. There are currently 8 PRS providers in Malaysia who are mandated to manage and provide Private Retirement Scheme.

Distributor: – responsible for selling the PRS funds. They include sales agents, bank branches etc

Contributors: – are individuals that contribute to the PRS.

Types of Private Retirement Schemes Available

Each of the eight PRS offers and manages its own Private Retirement Scheme which is comprised of several funds. In general, a provider will offer at least three Core funds. These Core Funds should have the following features according to the guidelines set up by SC:

Conservative Funds Moderate Funds Growth Funds
Default Age Group Above 50 Years 40 to 50 years old Below 40 years
At least 80% in debentures/fixed

Income securities and

of which 20% should

be in money market

instruments and a

maximum of 20% in


Foreign investment not allowed.

Up to 60% investment in equities

Foreign investment allowed.

Up to 70% investment in equities.

Foreign investment also allowed.



PRS member is given an option to contribute to funds to just one PRS provider or they can contribute to different funds offered by different PRS providers. This being voluntary in nature, members are free to any amount they are comfortable with whenever they want.

Benefits of Contributing to PRS

Tax Relief

Both the employer and employee are able to receive an annual tax incentive of up to 19% for employers and RM 3000 for employees. This in addition to the tax relief provided for EPF contribution adds up to a significant amount in savings.

Supplements your retirement savings

You want to make sure that you have enough money to sustain you throughout your retirement and Employee Provident Fund (EPF) is just not enough. PRS compliments your EPF and helps you increase and safeguard your retirement savings.

Offers Flexibility

Members are allowed to switch between PRS funds any time they feel like and they can also change providers once a year.

PRS Withdrawals

Just like the EPF system, PRS contributions are divided into two sub-accounts where sub-account (A) Gets 70% of the contribution and the other sub-account while (B) gets the other 30%.  The funds can be withdrawn in parts or in full under the following circumstances:

  • Upon reaching the age of retirement, this is currently 55years
  • In case the member dies
  • If the member relocates permanently to another country
  • Pre-retirement withdrawals (before reaching 55 years)

Pre-retirement withdrawals can only be done from sub-account B once a year and the first withdrawal can only be made at least a year after making the first contribution. This withdrawal, however, attracts a tax penalty of 8% of the amount withdrawn

If a member dies, the scheme will be required to release all or part of his/her savings to the executor or the named beneficiary of the member.

How to Join PRS

To become a PRS member, the first thing you need to do is choose a PRS provider among the eight authorized providers in the list below. After you have done that, select a fund that is most suitable to you and open a PRS account with your selected PRS provider and start saving.

Who are the Authorized PRS Providers?

  • Affin Hwang Asset Management Berhad
  • AIA Pension and Asset Management Sdn. Bhd.
  • AmFunds Management Berhad
  • CIMB-Principal Asset Management Berhad
  • Kenanga Investors Berhad
  • Manulife Asset Management Services Berhad
  • Public Mutual Berhad
  • RHB Asset Management Sdn. Bhd.


If you have not yet planned for your retirement, then you should start doing so now. Just start thinking about how you want your retirement to look like, and make a plan to make it a reality.

Having as many avenues as possible to save for your retirement will ensure that you will have a comfortable retirement and you will not worry about your money running out a few years after you retire.


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