🚀 Turn Your Annual Tax Bill into a Retirement Fund — Here’s How PRS Works Its Magic

Most Malaysians dream of a comfortable retirement, but the reality paints a worrying picture. According to EPF’s 2023 report, only about 30% of members aged 55 and above have at least RM240,000 in their account — an amount that would barely provide RM1,000 a month for 20 years. As life expectancy increases and the cost of living rises, the government realised that Malaysians were not saving enough for their golden years. To address this, the Private Retirement Scheme (PRS) was launched in 2012. PRS is a voluntary, long-term savings and investment plan designed to help Malaysians supplement their EPF and develop investment discipline.

Unlike EPF, where your savings are automatically deducted, PRS lets you decide how much to contribute and where to invest. Each PRS provider offers different types of funds — growth, balanced, conservative, or Shariah — allowing you to choose based on your comfort level with risk. In other words, PRS gives Malaysians a hands-on introduction to investing. You’re not just saving money; you’re learning how investment markets work, how returns fluctuate, and how diversification can grow your wealth over time.

To encourage more people to start, the government offers an annual tax relief of up to RM3,000 for PRS contributions. This means the amount you contribute to PRS reduces your chargeable income, helping you save on taxes. The higher your income bracket, the more tax you save from the same contribution. For instance, if your chargeable income is RM100,000, you fall under the 19% tax bracket. By contributing the maximum RM3,000 to PRS, your taxable income drops to RM97,000, and you save about RM570 in taxes (because RM3,000 × 19% = RM570).

Below is a quick reference table showing how much you can save depending on your income level:

While these tax savings may look modest, remember that PRS isn’t just about saving on taxes — it’s about growing your retirement nest egg. You’re also investing that RM3,000 every year, which can potentially earn returns of 4% to 7% per year, depending on your chosen fund and market performance. That means you gain both immediate tax savings and long-term compounding benefits.

Let’s look at a simple projection. Suppose you start contributing RM3,000 per year from age 25 and continue until age 55 — that’s 30 years of saving. Assuming three different growth scenarios — pessimistic (3% annual return), moderate (5%), and optimistic (7%) — your PRS balance at age 55 could look like this:

Here’s how the numbers work: you contribute RM3,000 per year for 30 years, totaling RM90,000 in principal. If your PRS fund grows at an average of 5% per year, you’ll end up with nearly RM200,000 at retirement — more than double your total contributions. Even in a pessimistic scenario of 3% returns, you’ll still accumulate around RM145,000. And because you get tax relief every year, you’ll also save around RM570 × 30 = RM17,100 in taxes over the 30-year period (assuming you stay in the 19% tax bracket).

Think of PRS as your personal retirement booster. By contributing as little as RM250 per month — RM3,000 per year — you not only save on taxes but also create a habit of disciplined, long-term investing. While platforms like TNG Go+, Versa, or RYTBANK let you park cash for short-term savings with daily interest and high liquidity, PRS is designed for the long haul — to give you growth, discipline, and peace of mind.

At the end of the day, PRS isn’t just a tax-saving tool — it’s a mindset shift. It encourages Malaysians to take charge of their financial future, to invest rather than merely save, and to think beyond short-term spending. You don’t have to be rich to start; you just need to start. Because when it comes to retirement, the best time to begin was yesterday — and the next best time is today.