Why the Private Retirement Scheme Is So Important?

WHY THE PRIVATE RETIREMENT SCHEME IS SO IMPORTANT?

• Minimize the risk

Private Retirement Scheme (PRS) was create to address the existing gaps in our retirement landscape and provide another platform for retirement fund building . Private Retirement Scheme (PRS) not only helps investors to reduce concentration risk, and also serves to protect their nest egg. Putting all eggs in a basket is risky which may lead a person to bankruptcy. A person may face a loss in a huge amount which will affect their saving plan by putting all eggs in a basket. Therefore, people are encouraged to invest in Private Retirement Schemes (PRS). Investors can voluntarily invest more in Private Retirement Schemes (PRS) to gain advantage for the diversification of the investment.

• Inflation

Private Retirement Schemes (PRS) enable Malaysian to cope with rising inflation. Inflation is one of the most important factors people concern for. Inflation is which will affect people’s saving plans and quality of living. Research shows that there are numerous of aging population are living in a rising cost of living and unstable financial markets. The life after retirement will be tough without an adequate retirement funds. This is because the value of money in future will be different compared with value of money today. Value of money will depreciate in future and rising cost of goods and services reduce people’s purchasing power. People in future need more money to buy the same goods and services compared to now. People now need to earn and save more money in order to cope with the rising inflation and money depreciation in future.

• Increase savings

Private Retirement Scheme (PRS) helps to drive up the amount of money saved for retirement with a higher saving rate. Assume that a person can live until 75 years old and he or she retires in age of 55. The amount of savings has to use for 20 years after retirement or maybe more than that. Therefore, some of the people will continue working part-time jobs after retirement to earn more money because they feel that their saving is insufficient for them to live for around 20 years. Assume that a person save RM3, 000 per year with 5% average annual return in Private Retirement Schemes (PRS) at the age of 25, he or she can expect to get approximate RM150, 000 in 25 years before he or she retires. By the time he or she retires, he or she not only will receive retirement fund from Employees Provident Funds (EPF), and also receive retirement funds from Private