5 December 2011

SC releases eligibility requirements for private retirement scheme providers

The Securities Commission Malaysia (SC) has finalised the eligibility requirements for private retirement scheme (PRS) providers and eligible firms can now make submissions to be approved as PRS providers.

The recent enactment of the Capital Markets and Services Amendment Act 2011 provides the regulatory framework for a PRS industry, including empowering the SC to approve PRS providers. A select number of suitably qualified and experienced providers with the required expertise in pension fund management or retail fund management would be approved to offer PRS schemes with an appropriate range of dedicated retirement funds catering for different investment and risk profiles.

Interested applicants are to submit their applications to the SC by 15 February 2012. More information about the eligibility requirements, as well as the format of applications, can be obtained here.

Applicants will be assessed on their financial standing and organisational capabilities, including meeting relevant capital requirements, internal control and risk management practices. Qualitative factors such as governance structure, reputation and professional standing as well as track record and commitment to grow the PRS industry will also be taken into consideration.

They will need to outline the business model for offering of PRS including the proposed range of funds, indicative fees and charges structure as well as their ability to meet the specific administrative requirements of the PRS, such as resourcing capabilities, systems and process capabilities and member servicing.

Once the PRS providers are approved by the SC, they would be required to make an application to the SC for approval of their proposed PRS scheme, which would provide the public options to supplement their retirement savings by making additional voluntary long term contributions within a well-structured and regulated environment. PRS guidelines would be released by the SC for this purpose. 

The PRS industry is intended to complement and supplement the existing mandatory schemes of the EPF. The framework can be used by individuals who have disposable income to save as well as employers to make voluntary contributions above the EPF mandatory contributions on behalf of their employees.

Measures to incentivise participation in PRS had been announced by the Prime Minister in the 2012 Budget speech, whereby a personal tax relief of up to RM3,000 would be given to contributions by individuals to PRS approved by the SC as well as tax deductions to employers for contributions above the statutory rate up to 19% of employees’ remuneration. Further, a tax exemption was also announced on income received by funds within the PRS schemes.