The government believes that a private pension industry is important because more than two million working adults were not yet covered under the Employees Provident Fund (EPF), this was revealed in the ETP roadmap launched today.
A joint-agency task force compromising the Ministry of Finance, Bank Negara Malaysia, the Securities Commission and the Economic Planning Unit (EPU) has been established to review the current pension system and adopt a structure similar to the World Bank’s multi-pillar pension system framework.
According to the ETP, the PPF will supplement the existing public pension schemes and also offered to non-EPF and the self-employed. Participation in the PPF will be voluntary.
Tax incentives will be introduced within the next 12 months which will include tax exemption on private pension disbursements, additional tax relief for contributions to PPFs and tax deductibility for employer contribution to PPFs.
The government also plans to review the current retirement age of 55.
The ETP expects the private pension industry to grow to RM7.3 billion, with more than 2.7 million participants by 2020.
In the beginning, the PPF will require investments and funding of RM48 million.
The government has also proposed that EPF dividends on amounts more than RM1 million be capped at 2.5 per cent to encourage the wealthy to withdraw the excess funds, which it expects will be partly channelled to wealth managers.
It also expects the total assets under management (AuM) of the wealth management industry to grow from RM17 billion to RM350 billion by 2020.
The government also plans the increase the AuM government-linked investment companies (GLIC) mandates external fund managers from five to 15 per cent, to help the country become a regional asset management hub.
Ordinary EPF members can withdraw up to 20 per cent of their excess savings for investment in unit trusts. Members with more than RM120,000 in Account I are able to invest up to 50 per cent of the excess in unit trusts.
EPF members are also required to maintain a basic savings amount based on age from RM1,000 to RM120,000.
