13th May 2026 - 4 min read
Several major insurers, including Hong Leong Assurance, Prudential, Great Eastern Life, and Tokio Marine Life, have banned their agents from promoting cash trust schemes, according to internal circulars. The schemes, which promise returns of 10% or more per year, have typically been promoted through insurance agent networks, financial planners, and word of mouth.
A cash trust lets you place money with a trustee company, which holds it on behalf of your named beneficiaries. When the account holder dies, bank accounts are typically frozen until probate concludes. A cash trust can release funds quickly, covering funeral costs, outstanding bills, or household expenses while the family waits for the estate to be settled.
Trust companies offering these products are registered with the Companies Commission of Malaysia (SSM) under the Trust Companies Act 1949 and governed by the Trustee Act 1949. Both laws were written decades before anyone marketed cash trusts as high-yield investment products. The legal framework was never designed to regulate double-digit-return schemes, which is precisely why the Securities Commission (SC) is now having to step in.
A cash trust set up for estate planning holds your money and disburses it to your family when needed. A cash trust marketed as an investment product works differently. Some operators channel your funds into money-lending arrangements or securities, promising steady returns that far exceed what any licensed deposit or investment product offers. These investment-oriented schemes are the ones drawing regulatory attention, and they sit in a very different risk category from the products you may already hold.
A fixed deposit at a bank is protected by Perbadanan Insurans Deposit Malaysia (PIDM) for up to RM250,000 per depositor per bank. A unit trust is managed by a fund manager licensed by the SC. A cash trust offers neither protection.
| Fixed Deposit | Unit Trust | Cash Trust (Investment-Oriented) |
| Returns of 2%–4% p.a. (as of May 2026) | Returns vary with market | Some claim 10%+ p.a. (unverified) |
| Protected by PIDM (up to RM250,000) | Not PIDM-protected | Not PIDM-protected |
| Operated by licensed bank | Operated by SC-licensed fund manager | Operator may not be licensed |
| Regulated by Bank Negara Malaysia | Regulated by Securities Commission | Regulatory framework still being formalised |
| Flexible lock-in (1–60 months) | Generally redeemable | Often locked in for 3–5 years |
| Early withdrawal: partial or full interest forfeiture | Early withdrawal: varies by fund | Early withdrawal: penalties can be steep |
Cash trusts have historically fallen outside the direct supervisory remit of both Bank Negara and the SC. Products that function like deposit-taking or pooled investment schemes have operated without the licensing requirements imposed on banks, fund managers, or unit trust operators.
Malaysia has been here before. In the 1980s, deposit-taking cooperatives collapsed after attracting billions in public funds with promises of high returns and minimal risk. The cooperatives operated outside normal banking regulations, and when they failed, depositors lost their savings with limited recourse.
The SC is now finalising a framework to clarify licensing requirements for cash trust schemes that invest in capital market products such as securities, bonds, and unit trusts, and has begun investigating several trust companies suspected of operating without a licence. This follows the Capital Markets and Services (Amendment of Schedules 3, 4, 5 and 8) Order 2025 [PDF], which took effect on 1 January 2026 and expands the SC’s authority over trust-related activities. Deputy Minister Datuk Dr Fuziah Salleh has also told the Dewan Rakyat that the Trust Companies Act 1949 will be replaced with a new Trust Companies Bill.
If someone offers you a cash trust as an investment, treat it with the same scepticism you’d apply to any unlicensed investment offer, regardless of who’s making the pitch.
The clearest red flag is promised returns above what licensed products offer. Fixed deposits at licensed banks currently pay 2%–4% per annum. A scheme claiming 10% or more with no market risk is offering something no licensed institution can match. Closely related is lock-in periods beyond what comparable products impose, three to five years with steep early withdrawal penalties is a long time to surrender access to your own money, especially for a product with no deposit insurance.
Before committing any money, check the SC’s Investor Alert List and licensed entities register. Pay attention to how the product is marketed, too. If the pitch leads with yield and barely mentions estate planning, the product has been repackaged as something it was never designed to be.
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As a creative content writer, Eloise has covered finance, business, lifestyle topics, and even moonlights as a singer-songwriter outside of RinggitPlus. Her current interests are learning the best ways to optimise spending and credit card hacks to gain more airline miles.
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