Annuity RM3,000 Tax Relief

The Life Insurance Association of Malaysia (LIAM), believes the new tax relief of up to RM3,000 on contribution to a Private Retirement Scheme and insurance annuity for 10 years will augur well for the industry.

Whilst lauding the Prime Minister’s ‘budget for the rakyat’, such an incentive is indeed a good start by the government in recognising the need for suitable retirement planning, said LIAM.

The introduction of the Private Retirement Scheme will ensure that people who retire will be able to live without over-relying on their EPF savings.

As statistics have shown, the life span of average Malaysians
are getting longer, thus astute retirement planning at an early age would be a step in the right direction.

Whilst LIAM lauds this move to ensure private sector employees and the self-employed have sufficient savings upon retirement, the tax relief of RM6,000 on life insurance premiums paid by individuals is still combined with the statutory EPF contribution.

It is hoped that the separate RM6,000 tax relief for insurance premium will be realised in the near future,” said LIAM in its statement issued today.

"The tax relief of RM3,000 accorded to insurance annuity shows that the Government recognises the importance of insurance annuity, as lump sum has been proven to be an ineffective way for retirement planning, exhausting too early while not addressing longevity risk.

Whilst the tax exemption on investment income of Private Retirement Fund is given, so as not to erode the accumulation of the fund, it’s unfortunate that the same is not accorded to insurance annuity.

The current 8% tax on investment income of annuity fund would result in lower annuity amount and LIAM hopes that the government would consider the removal of such taxation.”

The industry also welcomes the announcement of the increase in the retirement age from 58years to 60 years for the public sector. It is hoped that the private sector would follow suit as employees would be able to accumulate more savings for their golden years.