PRS Notes
A) Formulas to remember:
1) Unit Price
Unit Price = Amount/Units
Units = Amount/Unit Price
Amount = Unit Price x Units
2) Average Total Return (or Simple Return)
Average Total Return = (Future Value - Present Value) + Distributions
Present Value
or
Average Total Return = (End Value - Begin Value) + Distributions
Begin Value
3) Compounded Annual Return:
FV = PV(1+i)^n
B) Terms in PRS
Account Structure
1) Sub-Account A = 70%
2) Sub-Account B = 30%
(similar to EPF Account 1 & 2)
Withdrawal
1) Sub-Account B:Pre-retirement, once per year. After 1 year initial contribution. Penalty 8%.
2) Sub-Account A & B:
a) Retirement upon 55 years old. No penalty, multiple times per year. Partial or full withdrawal..
b) Permanent departure from Malaysia via emigration. Full withdrawal.
c) Death. Full withdrawal.
d) Permanent Total Disablement, Serious Sickness & Mental Disability. Full withdrawal.
Core Funds and Default Options
1) Below 40 years: PRS Growth Fund (70% Equity and 30% Bond)
2) 40 to 50 years: PRS Moderate Fund (60% Equity and 40% Bond)
3) Above 50 years: PRS Conservative Fund (20% Equity and 80% Bond)
Non Core Funds
1) Any funds types
2) Max 10 funds per Provider.
a) 3 Core Conventional
b) 3 Core Syariah
c) 4 Non Core funds (any types)
Documents
1) Disclosure Documents
2) Product Highlight Sheets
Forward Pricing
Unit price purchased or redeemed based on the price after the next valuation point. Normally, the price at the end of the day.
Deed
3 Parties to a deed:
1) PRS Member
2) PRS Provider
3) Trustee
Document on modifications to Deed is called Supplementary Deed.
Institutions Involved
1) Securities Commission (https://www.sc.com.my)
2) FIMM - Federation of Investment Managers Malaysia (https://www.fimm.com.my)
3) PPA - Private Pension Administrator (https://www.ppa.my)
Law
Capital Markets and Services Act 2007 (CMSA 2007)
Capital Markets and Services (PRS Industry) Regulations 2012.
PRS
1) Pillar III of the World Bank Multi pillar pension framework
2) Voluntary scheme
3) Objective for Retirement only
Vesting
1) Contribution by employer to employee's PRS account.
2) Main purpose to promote loyalty. Means continue to work for the company.
3) Benefits only transferred to employee upon completing vesting conditions. Normally by number of employment years.
Switching
1) Switching between funds in same Provider
2) Once per year, after 1 year initial contribution.
Transfer
1) Transfer between funds of different Provider
2) Once per year, after 1 year initial contribution.
3) Same member in both Providers.
Fund of Funds
1) Invest all assets into other funds.
2) Minimum 5 other funds.
3) Cannot invest into other fund of funds.
4) Not exceeding 25% of the units of any single collective investment scheme
Feeder Fund
1) Invest all its assets into a single collective investment scheme
C) Other Notes
Income Replacement Ratio = 0.6 to 0.9.
Benefits of PRS
1) Tax Relief for investment up to RM3000/year until 2021.
2) Youth Incentive Scheme (RM1000 for contribution of total RM1000 in 2017 and 2018).
3) Savings in PRS are protected from Judgement Debt (bankruptcy).
List of PRS Benefits to Individuals
http://highlevelrules.blogspot.my/2017/07/benefits-to-individuals-by-savings-into.html
List of PRS Benefits to Companies
http://highlevelrules.blogspot.my/2017/07/benefits-to-companies-when-contributing.html
Rules and Regulations are to Protect the Contributors (Members).
SC is the main regulator and approves all in the PRS industry.
Eligibility to be PRS Member
1) Malaysian and Foreigner individuals above 18 years old.
2) Employer contribute for employees.
Account Type
Single account holder only.
Not joined holder.
Not corporate. Only contribute for staff.
Employers Tax Deduction
Up to 19% of employee remuneration including EPF contribution.
If EPF 12%, additional 7% for PRS.
Suitability Assessment Process
1) Gather Information
2) Analyse Information
3) Match Funds
4) Recommend Funds
(How to Remember: GAM-Retire)
Suitability Assessment Not Required when:
1) Member did not choose fund
2) Switch fund within default option based on age
3) Employer contribute for employee
Investment Spread Limit
1) Securities:
a) Single issuer = 10%
b) Group of companies = 20%
2) Bond/Fixed Income:
a) Single issuer = 20%
b) Group of companies = 30%
3) Cash Management:
a) Single issuer = 20%
b) Group of companies = 30%
Drawbacks of Compounded Annual Returns (CAR)
1) Assume returns at same rate every year.
2) Focus on return without consider risk.
3) Must put into context of risk & investment period
Benefits of Compounded Annual Returns (CAR)
1) Used for comparing fund performances that differ in holding periods
2) Standardizes the investment returns into one comparable output
PRS Consultant Registration lapse if:
1) Registration of principal is revoked
2) Registration of principal is suspended
3) Principal cease(stop) operations.
D) PRS vs Unit Trust
1) Disclosure Documents vs Prospectus
2) Contributor vs Investor
3) Member vs Unit Holder
4) PRS Consultant vs Unit Trust Consultant
5) PRS Provider vs UTMC
You can download the FIMM PRS Exam e-Study guide from this link:
https://www.fimm.com.my/resources/e-study-guide/cpre/
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