SC liberalises Guidelines on Private Retirement Schemes

The Securities Commission Malaysia (‘SC’) issued the revised Guidelines on Private Retirement Schemes (‘Revised Guidelines’) on 21 February 2020.
The Revised Guidelines introduce several liberalisation measures which the SC said were made after a robust review process undertaken by it in consultation with the industry and the Private Pension Administrator Malaysia.
Among the key changes introduced under the Revised Guidelines are the following –
  1. Conservative funds are now allowed to invest in foreign markets as a result of the removal of Schedule B1 (in particular, paragraph 4(a)) of the previous version of the Revised Guidelines.
  1. New requirements have been introduced (in particular, see paragraph 8.16A) which enable private retirement schemes (‘PRS’) to invest in gold exchange traded funds.
  1. PRS members are permitted to make pre-retirement withdrawals of the entire amount in sub-account B for healthcare for self or for immediate family members or for housing purposes without incurring any tax penalty.
The expression ‘healthcare’ has been defined as any of the illnesses listed in Schedule J of the Revised Guidelines or any other illnesses as may be specified by the SC and includes all medical equipment and/or medication prescribed in writing by medical practitioners in relation to such illnesses, whilst ‘immediate family’ refers to a member’s spouse, biological child, step-child, adopted child, biological parent, parent-in-law, adopted parent, step-parent or sibling.
Schedule J sets out a list of 91 illnesses including cancer, Alzheimer’s Disease, cerebral palsy, Parkinson’s Disease, epilepsy, blindness, major depression, schizophrenia, Prolapse Intervertebral Disc requiring surgery, AIDS, HIV, loss of independent existence and terminal illness.
The expression ‘housing’ means financing building or purchase of a residential property in Malaysia, redeeming or reducing a housing loan in Malaysia, or financing a rent-to-own scheme or any other housing schemes in Malaysia as may be specified by the SC.
The pre-retirement withdrawal for healthcare and housing purposes were measures announced at the Malaysian 2020 Budget.
  1. In respect of the default option, the age thresholds for allocation of contributions under paragraph 11.10A and for switching of core funds under paragraph 11.13 have been raised by five years from 40 and 50 to 45 and 55 respectively. According to the SC, the increase in the thresholds is due to the longer life expectancy of the Malaysian population.
  1. A new paragraph 11.13A provides that the switching of core funds under paragraph 11.13 is to be carried out in equal proportions over a period of five years. Question 3 of the Frequently Asked Questions on Revised Guidelines on Private Retirement Schemes (‘FAQs’) issued by the SC on 21 February 2020 provides helpful guidance as to the manner in which the proportion or number of units is to be determined for the purposes of switching of core funds.
Although the Revised Guidelines came into effect on 21 February 2020, PRS Providers will be given until 1 March 2021 to comply with paragraphs 11.10A, 11.13 and 11.13A. The SC has advised PRS Providers who need to amend their PRS deeds or disclosure documents to consult the SC on the timeframe for registration of supplemental or replacement deeds or disclosure documents (Question 1 of FAQs).