Starting on 15 March 2020, we can make pre-retirement withdrawal from private retirement scheme (PRS) for certain purposes without the 8% tax penalty. The allowed purposes are housing and healthcare. We could withdraw from Sub Account B which holds 30% of our savings.
Healthcare
For healthcare purpose, we can withdraw for ourselves or immediate family members, including spouse, children (biological/adopted/step), parents (biological/adopted/step/in-laws) and sibling (biological). The treatment can take place in Malaysia or overseas.
We can withdraw for 91 types of illnesses, including medical equipment or medication for listed illnesses. For the list of illnesses, please refer to this PDF.
Other than the PRS Withdrawal Form for Healthcare (PPA003D), we also need to submit other documents. If withdrawal is made for family members, we must submit proof of relationship. For more details, do refer to this PDF.
There are two methods of withdrawal: normal withdrawal and fast-track withdrawal. The differences are the type and number of documents that we need to submit. Do refer to the links above to find out about the documents required for each type of application.
Housing
We can withdraw to purchase a residential house, build a new house or reduce or redeem housing loan balance (where the member is a joint purchaser) in Malaysia .
The requirement for withdrawal is a minimum balance of RM 500.00 in Sub Account B.
The withdrawal application requires Housing Withdrawal Form (PPA004D for purchasing or build a house and PPA005D for reducing or redeeming a housing loan) and other documents. To find out more on this, do refer to this PDF.
The application process are divided into normal withdrawal and fast-track withdrawal too.
Conclusion
For these two types of withdrawal, we can withdraw from Sub Account B once per year. There is no restriction on the number of PRS funds that we can withdraw from. Let’s say you have four PRS funds. You can withdraw from the Sub Account B of the four funds. Nonetheless, you will have to submit a form and the required documents to every PRS provider.
We will receive the proceeds in our bank account within 10 business days once the application is approved.
For more information, you can get it on Private Pension Administration website (Link).
Overall, I think that PRS pre-retirement withdrawal is beneficial to us. It is good to have a buffer that we can tap for emergency. However, I think that it is better to keep the money in the funds for the compounding effect. So, my thought is that we should only treat this pre-retirement withdrawal as the last resort.
Recently, due to the Covid-19 pandemic, the government’s Economic Stimulus Package allows PRS members to withdraw up to RM 1,500.00 from Sub-Account B of every fund that we own without any penalty. This exemption will start from April till December 2020. I still think that we should not touch the money unless we are really desperate. Otherwise, there is a risk that we would not be able to attain our retirement goals. However, if you really do need money during this critical period, it is good to know that you can tap into your PRS funds to tide you over.
