PETALING JAYA, July 25 ― Even with the government chipping in a decade’s worth of tax breaks and incentives, private retirement schemes (PRS), introduced as an alternative to mandatory savings under the Employees Provident Fund (EPF), are finding it tough to win over Malaysians, according to the Wall Street Journal.

As part of efforts to increase the uptake of the schemes, Putrajaya previously announced a yearly tax incentive of RM3,000 during the first 10 years of PRS contributions. And to sway employers, the government will also offer tax deductions for contributions made on behalf of workers.

Still, the industry is running up against a wall in Malaysia, according to a report by the business newspaper yesterday.

During a conference on the PRS last month Securities Commission (SC) chairman Datuk Ranjit Ajit Singh revealed the participation in the schemes.

“The rationale behind the introduction of PRS has always been clear and compelling,” he said, adding that the PRS ― offered by eight companies approved by the SC ― now has over 30,500 members with a total net asset value (NAV) of RM97.5 million.

The EPF, in comparison, has over six million contributors.

A reason why sign-ups with the PRS have been low is that it is meant to supplement the EPF.

“One of the biggest challenges facing the industry in Malaysia is the soft competition with EPF because people feel more secured if they are seen as buying into the system,” Bob Charles, Asia-Pacific managing director at consulting firm Towers Watson, was quoted as saying by the WSJ.

The EPF guarantees a minimum 2.5 per cent annual dividend and paid a record 7.7 per cent in 1996. Over the past 10 years, it has been paying dividends of at least 4.5 per cent annually. Participation to the country’s largest retirement savings is also mandatory.

One EPF contributor who spoke to the WSJ expressed reticence about putting part of her funds into such schemes.

“I’m not very comfortable investing in these private funds… I would rather put my money into properties and collect cash,” Jessie Lim, a 36-year old sales executive, told the business daily.

“But I’m willing to reconsider depending on their performance.”

Such anxiety may be because of the lack of understanding among the public regarding the PRS.

“There is an ongoing confusion between PRS, unit trusts, the public and mandatory savings scheme, and products and services offered by banks and insurance companies,” Steve Lim, chief product officer of Hwang Investment, told the WSJ.

During the conference last month, Ranjit said the Private Pension Administrator (PPA) that oversees the schemes had set up a fund of RM5 million to raise awareness about the private retirement fund industry across a five-year campaign.

From the numbers, it would appear the campaign is sorely needed, but for now, PPA CEO Datuk Steve Ong remained optimistic.

“At first start, we are already getting about 18 per cent contribution, I think it’s an excellent start,” he told reporters when met on the sidelines of the conference, pointing out that the PRS had only started six months ago.