Annuities Commodity (Malaysia) Rachel Goh Yik Teng MA0N0236 Managerial Finance Real Cases Presentation

What is Annuities  “An annuities is a stream of equal periodic cash flows, over a specific time period  These cash flow usually annually but can occur at other intervals (monthly)  Inflows – returns earns on investments  Outflows – funds invested to earn future returns

Types of Annuities  Ordinary Annuity – the cash flow occurs at the end of each period  Annuity Due – the cash flow occurs at the beginning of each period

Annuity Commodity in Malaysia  Bank Accounts  Insurances  Mortgage  Hire purchase (Car)  Taxes – income tax  EPF

Bank Accounts  Saving accounts – “maintained by retail financial institutions that pay interest” (0.25%/annum)  Fixed Deposit account – “provides investors with a higher rate of interest than a regular savings account, until the given maturity date” (3.0% - 3.2%)

Insurances  “the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment”  In Malaysia, Insurance agency provide customized package based on individual needs  Combination: medical, accident, life, saving, investment & etc. into 1 policy  Insurance for cars & houses  Payment term: monthly, quarterly, bi-yearly, or yearly

Mortgage  “a loan secured by real property”  Based on BLR (Basic Lending Rate) – 6.60%  Fix mortgage – the interests rate is fixed for the whole tenure  Flexible mortgage – interest rate is fluctuated by the BLR, interests rates are varies from different banks  Tenure: up to 40 years

Hire Purchase (Car)  “pay for goods in parts or a percentage at a time”, the rest pay with interests monthly  10% deposit  Buyer need to prove income status or else guarantor needed  Tenure: 3, 5, 7, 9 years  Interest: varies (depends on the car company and bank)

Taxes – Income Tax  Tax levied on the income of individuals or businesses  Taxable rate (for individual) – up to 26%  Minimum taxable income – RM2,500/mth  Taxable rate (for businesses) – 25%  Filing: yearly (own submission) or monthly (employer will deduct from the salary)  Tax deduction: insurance, books, medical fee for parents, sport equipment & etc

EPF (Employees Provident Fund)  “compulsory savings plan and retirement planning for legally employed workers”  save a fraction of employee’s salary  Both employee and employer have to contribute to this fund monthly  Employee – 11%, employer – 12% (min)  Dividends – EPF only obliged to provide 2.5%. As to-date, EPF provides 6%  Withdrawal is allowed for certain circumstances

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