PRS fund expected to record exponential growth this year

It has recorded a fund size of RM2.2b last year, a 47.1% YoY increase

By KEVIN WONG / Graphic By TMR

THE Private Retirement Scheme (PRS) fund is expected to experience an exponential growth this year, in tandem with the increased awareness among young Malaysians on the importance and benefits of having adequate savings.

As reported by American financial services firm Thomson Reuters Lipper, PRS recorded a fund size of RM2.21 billion — a 47.1% year-on-year (YoY) increase, or RM707 million, in 2017 from the previous year’s repository of RM1.5 billion.

Affin Hwang Asset Management Bhd (Affin Hwang AM) chief marketing and distribution officer Chan Ai Mei said the continuous growth is a result of a few effective factors.

“Over the years, more Malaysians are becoming more aware of PRS and its benefits. “At the same time, efforts from the government such as the PRS Youth Incentive have seen more Malaysians taking up the scheme,” she said.

Via the PRS Youth Incentive, members receive RM1,000 from the government after their initial investment of RM1,000 into PRS.

The amount is an improvement from 2016’s scheme that offered members RM500 for an investment of RM1,000.

Chan said the growth could also be attributed to the increasing support among employers for the scheme, as they view it as part of an attractive remuneration package.

“With that said, we believe more Malaysians will start investing in PRS as the PRS providers have built up the track record for the funds, which provide a great confidence in this scheme’s ability to deliver on the expectations,” she said.

Despite the growth, Chan said PRS would still face certain challenges — especially in terms of education and awareness.

“As PRS is still relatively new, the public will only warm up to the idea of contributing to PRS once they understand the objective.

“Additionally, many still perceive the notion of putting away money early on for retirement to be one that’s not relevant to them.

“Many do not see the immediate relevance in topping up on the contributions to a scheme, especially since a large percentage of employees are part of a mandatory retirement scheme,” she said.

Chan added that PRS would benefit Malaysians in many ways — especially for those who are seeking ways to save, while preparing for their retirement.

“Statistics by the Employees Provident Fund (EPF) found that 98% of rural households have zero savings, and the same goes to 86% of those in urban households.

“In short, many Malaysians are ill-prepared for comfortable retirement years. “With the introduction of PRS, Malaysians are now able to be better prepared for comfortable retirement years as the funds are purpose-built for long-term investment,” she said.

Chan said savings for retirement could also be complicated as it is a long-term commitment.

As such, investors would not know what would be the right vehicle or option to use.

Meanwhile on Affin Hwang AM’s PRS, Chan said the funds are designed with the right combination of investment solutions to achieve the contributors’ needs.

“With a balance portfolio in terms of asset allocation and risk, the contributors will be able to enjoy a longterm return consistently.

“On the other hand, our PRS Solution offers retirement investment solutions for different risk profiles of investors — the risk-taker, the moderate risk investor and the conservative investor, as well as the conventional and the Shariah-compliant assets within these three types of investment solutions to cater to different investors’ needs,” she added.