From now until 31 December 2020, eligible PRS members will be able to apply for pre-retirement withdrawals from their private retirement schemes (PRS) without being charged an 8% tax penalty. The withdrawals will be made from their sub-account B.
According to the FAQ from the Private Pension Administration (PPA), PRS members below the age of 55 years old can apply for these tax-exempted withdrawals from one or more funds. However, it is subject to a maximum amount of RM1,500 per PRS provider. If you do exceed the RM1,500 limit, then you will be charged the usual 8% tax penalty for the excess withdrawal. You are also allowed to take out the full amount from your sub-account B.
To illustrate, if you have RM500 in your sub-account B, you can request to take out the entire sum without penalty. However, if you have RM2,000 in the account, you will only be able to withdraw RM1,500 without incurring the penalty. Should you decide to take out the full RM2,000 sum, then you will be charged an 8% tax penalty on the extra RM500 that you withdrew (which amounts to RM40). That said, members aged 55 years and above are not restricted to the maximum withdrawal limit.
Note also that you are only allowed to withdraw from funds that you have enrolled for at least a year, and that you can only apply once to each PRS provider during the exemption period. After the PRS provider has received your application, it will process your request within 10 days.
PPA also commented that you are not required to disclose your reasons for these withdrawals. That said, it advised all members to be prudent when utilising this facility as these savings are meant for your retirement after all.
Pre-retirement withdrawals from the PRS are typically charged an 8% tax penalty, except for the purpose of healthcare and housing. However, Prime Minister Tan Sri Muhyiddin Yassin had announced a temporary penalty exemption during the reveal of the Prihatin Economic Stimulus Package.
To find out more about how you can apply for this facility, you will need to contact your PRS providers as the application process for each of them may differ. Alternatively, you can also call the PPA at 1300-131-772, email [email protected], or check out the full FAQ on PPA’s website.