RETIREMENT & PENSION PLANNING CHAPTER 7: RETIREMENT & PENSION PLANNING ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 CHAPTER OUTLINE Introduction The importance Pitfalls EPF SOCSO Will, Faraid & Hibbah ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 INTRODUCTION Only 34% of Malaysians putting aside money regularly for retirement funds Although EPF savings is one of the main channels to provide for retirement, 99.9% of the contributors would withdraw their EPF savings in one lump sum once they reach 55 years of age and 70% of them would use up all their EPF savings in just three years post-retirement Great Eastern Life Assurance (M) Bhd executive vice-president and chief marketing officer Loke Kah Meng ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 INTRODUCTION A retirement plan is an arrangement to provide you with an income, or pension, during retirement, when you are no longer earning a steady income from employment. Retirement plans may be set up by: employers, insurance companies, the government or other institutions such as employer associations or trade unions. Personal Investment ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 THE IMPORTANCE To live a comfortable standard of living during retirement To determine level of income needed during retirement ROSELIZA HAMID/UITM KELANTAN/2010

PITFALLS TO SOUND RETIREMENT PLANNING Start too late Put away too little Invest too conservatively ROSELIZA HAMID/UITM KELANTAN/2010

GUIDE FOR ESTIMATING RETIREMENT NEEDS Steps to be followed: To estimate household expenditures during retirement To estimate income during retirement To estimate the inflation factor To estimate the funding for the shortfalls ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 EPF Provides retirement benefits for members through management of their savings in an efficient and reliable manner. Also provides a convenient framework for employers to meet their statutory and moral obligations to their employees. Members: Private and Non-pensionable Public Sector employees. As at 31st December 2007, has a total of 11.69 million members Mandatory Contributions: 23% of the employee's wages of which 11% is from the employee's monthly wage while 12% is contributed by the employer. Investment Allocation: include Malaysian Government Securities, Money Market Instruments, Loans and Bonds, Equity and Property Dividend: min 2.5% annually ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 EPF Contribution Effective on 1 January 2007 contribution will be credited into: Account I - 70% of monthly contribution, Account II - 30% of monthly contribution. Account I Savings in this account is meant to be used for retirement only, and it cannot be fully withdrawn before reach the age of 55, become incapacitated, leave the country or deceased (payment will be made out to the nominee/heir). Employees are allowed to invest part of this savings at their own risks. Account II Savings in this Account is meant to help employees to make early preparations for a comfortable retirement. Withdrawals are allowed for the purposes of: Attaining the age of 50 years; Owning a house - the down payment for the first house; Settling the balance of housing loan - first house; Financing education for employee and that of his/her children's; Medical expenses for employee and that of his/her children's ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 EPF Deductions Wages received daily, weekly, monthly and others Wages in lieu of notice of termination of employment Payment for unutilized leave Bonuses Allowances Commission Arrears of wages Wages for maternity leave, study leave or half pay leave Arrears for wages arising to salary revision ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 EPF Withdrawals Age 50 Years Withdrawal Age 55 Years Withdrawal Withdrawal to Reduce / Redeem Housing Loan Incapacitation Withdrawal Leaving Country Withdrawal Health Withdrawal Education Withdrawal Pensionable Employees Withdrawal And Optional Retirement Withdrawal Members’ Savings Investment Withdrawal Withdrawal to Purchase a House Withdrawal to Build a House Withdrawal Of Savings Of More Than RM1 Million Housing Loan Monthly Installment Withdrawal Death Withdrawal ROSELIZA HAMID/UITM KELANTAN/2010

How Does Withdrawing EPF Affect Your Retirement Fund? fewer funds for retirement have roof to live under to own better houses and yet be able to lessen their monthly financial obligations. experience better cash flow as less money is spent out of hand for the loan They can use this facility to grow their wealth ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 SOCSO/PERKESO Administer 2 types of social protection scheme Employment Injury Insurance Scheme Provides protection to employees who are involved in accidents arising out of employment occupational disease or commuting accident Invalidity Pension Scheme Provides 24 hrs coverage for workers from invalidity or dies irrespective the cause of death. Objective: to ensure payments are made to workers & dependents when unexpected incident occurs. ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 An employee employed under a contract of service or apprenticeship and earns monthly wages of not more than RM3k. Must be registered and contribute to SOCSO regardless of his employment status i.e. permanent, temporary or casual in nature. Covers Malaysian workers and PR. Does not covers govt. employees, domestic servant and employees exceed 55 years, self employed individuals, foreign workers. ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 BENEFITS Medical benefits Temporary disablement Permanent disablement Constant attendance allowance Funeral benefits Rehabilitation benefit Dependant’s benefits ROSELIZA HAMID/UITM KELANTAN/2010

ROSELIZA HAMID/UITM KELANTAN/2010 WILL, FARAID, HIBBAH A Will is a declaration in prescribed form of the intention of the person making it of the matters which he wishes to take effect on or after his death, until which time it is revocable. Faraid or the law of inheritance in Islam. Hibbah is giving one’s wealth to others without the expectation of any replacement or exchange with the transferring effect on the ownership during lifetime or executed upon death. Applicable either to family members (legal heirs) or members who are not entitled to inheritance ROSELIZA HAMID/UITM KELANTAN/2010

Characteristics of a Will A Will would normally include information on the appointment of an Executor who will execute the Will, the beneficiary or beneficiaries to the Will and allocation of assets to the named beneficiaries. Apart from that, the appointment of guardian for minor beneficiaries, revocation of earlier Wills, donation of organs, direction for burials and other special instructions can also be included in a Will. ROSELIZA HAMID/UITM KELANTAN/2010

Causes Inheritance under Faraid Nikah: valid marriage contract in Islam Wala’ (relationship): e.g.: emancipator and slave Nasab (kinship): r/ship thru the womb or blood ROSELIZA HAMID/UITM KELANTAN/2010