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Malaysia securities regulator calls for new retirement solutions

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Malaysia’s securities regulator says private retirement schemes (PRS) in the country can be improved, and suggested that the inclusion of portfolio account management plans into the schemes will make for a “more holistic investor journey”.

PRS are very similar to unit trust funds and are offered by several asset managers in Malaysia. But they account for just a tiny fraction of retirement savings compared to the big pension funds.

“While efforts have been made to liberalise asset allocation and flexibility to withdraw funds for health and medical reasons, there is still room to enhance the investment proposition of PRS. This includes the need to differentiate against the typical unit trust fund as well as enable innovative and low-cost PRS investments,” Securities Commission Malaysia (SC) says in its third capital market masterplan, a five-year blueprint aimed at building a sustainable and inclusive economy.

Figures in the 119-page document published on September 21 show that total assets under management in PRS as of end-2020 was 3.7 billion ringgit (US$883.37 million).

By comparison, the Employees Provident Fund, which manages retirement savings of private sector employees and the self-employed and is Malaysia’s largest pension fund, has 989 billion ringgit of assets, and civil service pension fund Kumpulan Wang Persaraan has 150 billion ringgit.

The SC says PRS represent only a small share of working Malaysians, and most of the members have low average savings; around 59% hold less than 5,000 ringgit in their accounts. Some 71% of PRS members are employed, 19% are students, homemakers and retirees, and 10% are self-employed.

According to the regulator, as investors near retirement, their investment strategies will need to include “permutations of growth, steady long-term income and decumulation investments across a range of asset classes to better prepare for their short to long-term life changes”. It suggested that these needs may be served by the introduction of portfolio account management schemes or PAMs within the PRS.

“PAMs will reflect a fundamental change in the current structure,” the document says. “The structure of PAMs will enable a more holistic investor journey, with some customisations along the investment process based on [an] investor’s risk appetite and needs. This is currently limited to high-net-worth individuals and private banking clients.”