PRIVATE RETIREMENT SCHEME (PRS) PRODUCTS ROLLING OUT ANY TIME NOW

Six months ago, on April 19, I posted an article about the national Private Retirement Scheme, in which I said the scheme was taking shape fast. I also mentioned that the appointed eight PRS providers were required to submit their product plans within six months’ time for approval by the Securities Commission. True enough, now that it is October (six months from April), some of the providers are set to roll out their products any time very soon. As proactive preparatory actions to capture the market when the products are launched, they have already begun road shows to introduce the PRS to their targeted distributors and also to train them.

My research for updated information via sources in the industry, including a few providers, enables me to share the following affirmed key standard features and mechanisms of the products for your easy reference:-

*Open to both Malaysians and foreigners (with valid documents) above age 18.

* Tax relief on contribution of up to RM3,000 per annum, available next 10 years from 2012.

* Employers sponsoring contributions for employees are eligible to claim tax deduction up to 19% of their employees’ overall annual remuneration.

* Three (3) core funds, namely Growth Fund (maximum 70% equities and balance in fixed income assets), Moderate Fund (maximum 60% equities and the balance in fixed income) and Conservative Fund (80% in fixed income). Apart from the core funds, a provider may have non-core funds parked under the core funds, e.g. an Islamic Moderate Fund which is being made available by one provider.

* Participants have the option to select the fund/s of their choice.

* For participants who do not elect any particular fund, the default option automatically will apply, which allows the provider to auto-pick the core fund on behalf of the participant according to the age group as follows: Growth Fund (below age 40), Moderate Fund (40 – 50 years old), Conservative Fund (above 50 years old). When the participant moves to the next age group, the provider will redeem units from the existing core fund to purchase units in the next core fund identified for the newly attained age.

* Participants can request to switch funds along the way, between core funds and non-core funds. A provider is allowed to either charge a low or no switching fee. It can also stipulate the limit in number of switch times per year. 

* A participant is allowed to sign up with more than one provider.

* A sponsoring employer may choose the provider while selection of funds lies with employees.

* Employers sponsoring the contributions may opt for a vesting schedule formula to promote employee loyalty. For example, the vesting ratio may range from 0 to 100% from 1^st to 10^th year of service. If an employee leaves early, say in the 5^th year, only 50% of the invested savings may be vested to him.

* Some providers may offer regular contribution scheme and/or single lump sum contribution. Additional or top-up contributions are allowed.

* Unlike unit trust investments, withdrawal of savings from Employees Provident Fund (EPF) account to fund the contributions toward PRS is not allowed.

* Contributions can be on monthly mode and remitted via bank or credit-card auto-debit arrangements.

* Contributions go into two sub-accounts: Sub-account A constitutes 70% of all contributions and the balance in Sub-account B. Sub-account A cannot be withdrawn/redeemed before retirement.

* Rules For Withdrawal/Redemption: (a) Pre-retirement withdrawal is allowed from Sub-account B. Participant is allowed to withdraw the whole amount from this sub-account or partial. Redemption  is subjected to 8% tax, deducted and collected by the provider upfront on behalf of the tax authority. (b) Retirement redemption can be done either in lump sum or periodically. Participant may also opt to retain the scheme. No tax is imposed on retirement redemption. (c) Withdrawal because of permanent departure from Malaysia through emigration is allowed. For foreigners, it can be done upon producing evidence of documentation cancellation such as work permit or permanent residency.

* Transferability/portability of savings in any amount from one provider to another is allowed, limited to once per year. The first transfer can only be done one year after the initial contribution. A provider can only charge the actual or reasonable expenses incurred for the transfer.

Special Note: I understand that as a form of consumer protection, participating members of a PRS provider may invoke a meeting under Regulation 20 of the PRS regulation upon fulfilling the following condition:

CAVEAT: The contents of this sharing are based on my personal research and sources of information. Therefore, you should also relate to other relevant sources in order to verify the validity of the contents. Thank you.

PEARL CLUB MEMBERS RE-LIVE THEIR PEARL MOMENTS OF PEARLY EXPERIENCES 

(FOREWORD: This article is dedicated to the Pearl Club of American International Assurance (AIA) in Malaysia which comprises individuals – both retired and existing personnel – who have had served the company for at least 30 years. Since its inception decades ago, it now has 500 members from the staff side and agency force. The management of AIA sponsors a major fellowship event organised by the club annually. In my personal capacity as an exco member, I wish to express thanks to AIA CEO Mr. Khor Hock Seng and his management team for rendering us generous support.)

QUOTE: Do not delve into the past, for the past won’t bring hope for the future.

QUOTE: Let the past be bygones, for bygones won’t make a difference to the present and future scenarios. 

Do you agree to the above statements? I believe you say “yes” on the spot.

So did I………until lately. After what I had witnessed during a three-day fellowship outing from Sep. 9 to 11 with a group of senior citizens who are members of the AIA Pearl Club, I now beg to differ slightly.

Yes, we should put  away the bitter moments of the past from our mind. But reflecting on memories of the positive fruitful experiences that have goaded us on in life will definitely adorn sanguine hope for a meaningful future. 

The fellowship activities in Lotus Desaru Resort in Malaysia’s southern state of Johor were filled with lively vibes from beginning till end. The travelling times to-and-fro in two coaches between Kuala Lumpur and the resort tied in with hilarious jokes, singing and sharing of philosophies all along the way.

The dinners for two nights, especially the main one on the second day, manifested creativity, energy and sprightly atmosphere. The presence of Tan Khia Fatt who was regional head of AIA Malaysia till the late 70’s, and veteran agency leader Mrs. Minor Liu of AIA Singapore (both are Pearl Club members in Singapore) added in the strong sentiments of attachment to the company which we have regarded as our honing home. There’s no denying that we still cherish the treasured pearly times when we groomed ourselves to what we are today, in sync with the company. Those were the pearl years filled with elements of mutual understanding, mutual respect and mutual support for one another. Fond memories of positive experiences that cloud out the not-so-memorable episodes will continue to roll us on to our drive to a beaming future. The three-day fellowship gathering brought out our everlasting youthful spirit and some hidden talents which may even surprise the young ones in AIA. 

“Uncle” Tan, at age 87, demonstrated he was as sharp mentally as he had been during his leadership tenure in AIA Malaysia four decades ago. His trademark “uncle-ly” words of wisdom, contained in his speech at the main dinner, reinforced our gratitude to the company for having granted us career opportunities. We should now reciprocate our gratitude by giving encouragement and sharing our valuable experiences to the younger generation working in the company. In gingerly clear expression, Minor, at age 89, resounded determination to pursue her business in AIA for as long as she is physically able. 

Talents exuded at both dinners. Imagine a 60-year rapper in canton-pop style. There was a master magician who held the audience spell-bound. Band performance led by the club president also interjected entertainment to the fun-filled dinner programme.

This year’s fellowship event has planted yet another pearly memory in my association with AIA, albeit no longer as a staff because I retired after 33 years of service last year, but as a member of a club linked to the company. The pearl years of my life with regard to the many friends I have cultivated from my working days, plus the wide knowledge I acquired during my tenure as an officer, will continue to harbour my heart and spirit. I shall continue to re-live my "pearls" of my pearly experiences in AIA as guidance for the future.

Long live Pearl Club and Pearl Club members!

(1) Tickling laughter, 2nd night. (2) President Jeffrey Kee thanks all members for their strong support to him and for this event. (3) Minor Liu......still as bubbly as ever at 89 years old.

 

IS GLOBAL RECESSION ALREADY HERE BY PMI COUNT?

A technical term that has frequently flashed out by media reports of late is Purchasing Managers’ Index, or PMI in abbreviation. 

The reports generally refer PMI scores of a region or country to infer whether its economy is improving or otherwise. They refer to the set benchmark of 50 points – above 50 indicates there is expansion and below 50 signals contraction. But apart from mere general descriptions, not many people really comprehend the mechanisms of PMI.

PMI data are the results derived from surveys conducted with relevant parties in supply management and purchasing professions. The Institute for Supply Management (ISM), founded in 1915, is the key organization for compiling PMI findings for the US. It releases regular reports at the beginning  of each month. For PMI outside the US, Markit Group is the predominant source. Other similar operators are, for example, IFO in Germany, Bank of Japan, the Chinese Government (PMI for China).

While Manufacturing PMI is mainly perused to gauge the sentiments of the manufacturing sector, it is also perceived as reflection of the overall economic standing. The logical premise is that if manufacturing is expanding, the economy at large should also trend likewise. Many economists closely watch PMI scores to forecast their GDP growth estimates.

An index of above 50 represents that the sector in question is expanding compared to previous month. The 50-point mark depicts the neutral level, i.e. no change from the previous month. The pace of expansion can also be recognised by comparing with previous month’s score. If the current figure above 50 is higher than previous month’s, also above 50, that means expansion is at a faster rate. Conversely, if the expansion figure is lower than previous month’s, we could interpret that the economy is growing at a slower rate.

PMI is a composite of five (5) key sub-indicators, viz. 

Higher weightage is accorded to new orders because this sub-indicator relates most to economic agility levels.

Now, let’s look at some latest PMI scores of various significant economies.

US Services ISM:  expansion trend lower.  

Now, we turn to Europe power house: Germany and France

·         Germany Manufacturing PMI:  Sharpest drop in new export orders since November 2011. 

 

 

France Manufacturing PMI:  Contracts at fast rate

(Above: France Services PMI: Outstanding business fell for 6th successive month in June)

Next, we have Asia power house : China

China Manufacturing PMI: New orders fell to greatest extent in 7 months.

 

Here come the “rising stars” Indonesia and Brazil :

Indonesia PMI: Is very weak

Look at India and Russia. You can see where the graphs are heading to. Slowdown in expansion appears to be the trend.

Japan. A quote extracted from Reuters’ report is good indication of the scenario there: “The Markit/JMMA Japan Manufacturing PMI fell in July to a seasonally adjusted 47.9 from 49.9 in June. More worringly, 47.9 suggested the sector that includes the likes of camera maker Canon Inc and carmaker Nissan Motor Corp is contracting at the fastest pace since April 2011, a month after the earthquake and tsunami……….” 

Finally, the Global Manufacturing PMI graph below denotes a sharp declining dip to contraction in the past quarter.

Having observed the various PMIs, do you feel global recession has already seeped in? To me, they are tell-tale signs of economic activity sluggishness or doldrums being experienced by the globe at large……..at least for another 1-2 years.  Some may call such a situation as economic slump, some may call it recession. 

Perhaps, the “5 Reasons Why A Global Recession Seems Likely” extracted from a Forbe’s article, posted in June, 2012, may supplement more light:

*Europe, the world’s largest economic bloc, is already contracting at an accelerating pace.

*China is slowing and is unlikely to be as strong a driver of global growth as it was just a couple years ago.

*India and Brazil, two extremely important emerging powers, also are slowing.

*The US economy, although still growing for the moment, cannot achieve “escape velocity”, the necessary growth to produce a self-sustaining recovery.

*The half-life on monetary bailouts is getting shorter and shorter.

I leave to you to form your own opinion.

(Note of appreciation to my friend Chan Cheh Shin for providing me some inputs)