Malaysian Internship With No Remuneration

In 2012 my son did an internship in Malaysia and was paid a monthly allowance of RM500. It barely cover the cost of travelling and food in exchange for working experience. Prime Minister suggested companies should give interns an allowance to cover their travel and food expenses rather than expecting them to do unpaid labour. However, the Malaysian Employers Federation president Datuk Syed Hussain Syed Husman reportedly said that making it compulsory for companies to pay interns will discourage employers from offering internships.

What Is Internship - Internships are an essential part of training and education, and a well-constructed programme that offers students a chance to gain experience and exposure in a real-world professional setting — something that simply can’t be replicated in a classroom. 
For employers, interns can also provide fresh perspectives, enhance employer branding, and support the workforce in many ways.

Payment Is Not Mandatory - Interns are not covered by the Employment Act 1955 in Malaysia. Interns do not qualify for the stipulated minimum wage (now at RM1,500) in Malaysia. 

There are Apprenticeship Contracts in the Act. But to qualify as an apprentice, interns need to have a written contract for at least 2 years. As such, benefits like minimum wage, or even leave entitlements aren’t legally required for interns. While some organisations offer healthy allowances to interns to offset their costs, there are still some internship programmes that do not include any form of remuneration for interns.

PM Anwar claimed that payment would be left up to companies and the government will not fix a policy on it as internships are not forced. The government will not determine a clear policy because this is an internship programme that cannot be forced.

Social Insurance Scheme Malaysia

The RM75 Perlindungan Tenang Vouchers (PTV) initiative has been discontinued due to the low claim rates compared to the allocation provided under the scheme. PTV scheme, implemented in 2021 and 2022 during the Covid-19 pandemic, aimed to extend insurance and takaful protection for certain groups, especially in the B40 income group.

Low Claim - Of only 4.9 million recipients who were in the lower income group, the claims were only 0.01% which means only 490 individuals benefited from the RM354mil allocation to provide for this scheme.

What Is RM75 PTV - The RM75 PTV is a national initiative by the government in collaboration with the insurance and takaful industry to extend social protection to the lower-income group, as announced in Budget 2022.

Under the programme, 16 participating insurance companies and takaful operators offer a range of 22 protection plans providing coverage against key risks such as death, accident, fire, damage of properties and other unfortunate events.

Alternative Scheme - MySalam has been in place since 2019, covering individuals aged between 21 and 65. Peka, a healthcare protection scheme for the B40 group, which has been in place since 2018. It includes health screening, medical equipment, incentives for cancer treatment, and transportation incentives.

Rahmah Cash Aid - Offers funeral benefits for those who are eligible for the Rahmah Cash aid (STR). When someone receives the STR aid and passes away, their next-of-kin will receive RM1,000 through Bank Simpanan Nasional and the Inland Revenue Board (LHDN).

The third phase of the Rahmah cash aid which will be distributed before the Hari Raya Aidiladha in June, a total of 3.9 million households is set to benefit with a total value of RM1.4bil.

For single elderly individuals without any spouses, some 1.2 million recipients are expected to benefit with a value of RM0.25bil while for single individuals, a total of 3.3 million is expected to receive the cash contribution with a value of RM0.49bil.

Only 4% of Malaysian Paying Income Tax

The disproportionately high contribution in personal income tax by the T20 group in 2022 is a reflection of the narrow tax base in Malaysia. This narrow tax base stems from the fact that a high number of people earn low wages in the informal economy or as micro-business owners, which exempts them from tax obligations.

As a result - the T20 individuals pay a bigger chunk of the taxes as they are formally employed with a taxable income falling into the higher percentages of taxation. Personal income tax rate for individuals is progressive, starting at 1% and gradually increasing to 28% as income increases.

More taxes being paid by the T20 because they are earning higher (salaries), which could be RM10,000 or RM100,000 a month. T20 group contributed RM33.68 billion, or 85%, of the total income tax collection of RM39.26 billion last year. While - M40 group contributed 13%, or RM5.38 billion.

Definition of T20, M40 & B40 - The T20 refers to the 20% of Malaysian households that earn RM10,960 or more a month. They account for 1.46 million households, according to the statistics department’s Household Income and Basic Amenities Survey 2019.

A total of 2.91 million households with monthly incomes of RM4,850 to RM10,959 make up the M40, the 40% middle-income earners.

The B40 group, or the remaining 40% at the bottom of the scale, also accounting for 2.91 million households, take home less than RM4,850 each a month.

Resident individuals in Malaysia whose incomes do not rise above RM5,000 do not have to pay taxes. For those who pay, the rate rises gradually, up to 28% for those whose taxable income is RM1 million or higher.

Only 4% Paying Tax - According to reports, only slightly more than 1.3 million out of a population of more than 33.5 million are individual taxpayers, representing a mere 4% of the total population. Income tax contributes significantly to the federal government’s revenue, accounting for 50% to 56% of total annual revenue over the past five years.

In 2022, the government collected RM153.5 billion in direct taxes, accounting for 52% of its total revenue. Non-tax revenue came up to RM85.6 billion (29% of total revenue) and indirect tax revenue was RM55.3 billion (19%).

As for this year, the government projects its total revenue to increase to RM291.5 billion, of which RM164.1 billion will come through direct taxes, RM54.1 billion in indirect taxes and RM73.2 billion in non-tax revenue.

Universal Or Indexed Life Insurance Plan

A universal life insurance policy can accumulate cash value in addition to providing a death benefit. There are two basic types of universal life insurance policies you should know about. With indexed universal life insurance, the cash value can increase based on the performance of a market index. With variable universal life insurance, on the other hand, a policyholder directly invests the cash value into securities.

Universal Life Basics
Universal life insurance is a kind of permanent life insurance. Permanent life insurance differs from the other main variety of life insurance, term life insurance, in that permanent life insurance does not expire and part of the premium is used to build up cash value in a subaccount. Term Life insurance generally costs less and is for a limited number of years but provides only a death benefit, without any cash value feature.

There are two major varieties of permanent life insurance, including whole life insurance as well as universal life insurance. With both types the cash balance in the subaccount can increase, but with whole life the growth is based on a fixed interest rate while with universal life the growth rate can vary.

Whole life premiums are also fixed. A universal life policyholder can opt to pay a lower premium during a period when cash flow is tighter, or pay more to build cash value. These policies also may also include other features, including long-term care coverage and other living benefits. 

Favorable tax treatment is an important characteristic of permanent life policies. The death benefit is free of income taxes. Funds in the cash value subaccount also grow tax-free, and policyholders can withdraw funds or take loans against the cash value while still alive without owing taxes on the proceeds.

Indexed Universal Life

Indexed Universal life is one of the sub-types of universal life. With an indexed universal life policy, the cash value can grow based on the performance of a stock market index. This allows for a potentially higher return than a whole life policy with a fixed return.

Indexed universal life policies typically have participation rates describing the return’s relationship to the index. A 60% return rate means the cash value will earn 60% of the return posted by the tracked index. If the index returns 10%, in this case, the subaccount will earn 60% of 10% or 6%.

However, these policies also often have caps on the maximum return. In the previous example, if the policy had a cap of 5%, the subaccount would earn 5% instead of 6%.

In addition, indexed universal life policies often have floor rates describing the minimum return the return will post. A floor of 1% means the policy will return 1% even if the index posts a negative return.

Pros of indexed universal life include the ability to get a death benefit along with tax-free growth and distributions. Policyholders can also contribute unlimited amounts and use the money at any time, which are useful advantages compared to retirement accounts such as IRAs.

Cons of indexed universal life include caps on returns along with sales, administrative and other fees which are typically higher than other investment options such as exchange-traded funds. Also, withdrawals from the cash value subaccount may become taxable if the policy is surrendered or lapses.

Variable Universal Life
Another type of universal life insurance is varaible universal life. It shares many of the features of indexed universal life, including tax treatment and the ability to pay flexible premiums and accumulate cash value in a subaccount. The primary difference is how funds in the subaccount are handled.

Instead of tracking an index, the cash value in a variable universal life policy subaccount can be invested directly in securities, such as stocks and bonds. Variable universal life policies do not have participation rates, cap rates or floor rates as indexed universal life does.

The return on a variable universal life policy cash value will reflect the actual performance of the securities, without any limits up or down. This means it is possible to get a higher return than with an indexed universal life policy but also to get a lower return as well as to lose money.

Pros of variable universal life policies include the possibility of a higher return while still getting favorable tax treatment and a death benefit. Cons include the possibility of a lower return or actual loss. Variable universal life policies also typically have higher fees than indexed universal life due to the added costs of managing the investments.

IUL v. VUL: Which One Is Better?
Which one is best for you will largely depend on what you want to get out of your life insurance policy.

Indexed universal life can be a good choice for someone who wants a death benefit as well as flexibility in paying premiums and the prospect of a somewhat better return on the cash value than is offered by a whole life policy. Indexed universal life buyers tend to be more risk-averse than variable universal life policyholders, who are willing to take the chance of higher returns in exchange for the possibility of a loss.

The Bottom Line
Indexed universal life and variable universal life are two types of permanent life insurance that let policyholders pay varying premiums and accumulate cash value. Indexed universal life cash value can grow based on the performance of a stock index. Variable universal life cash value can be invested directly into securities. Indexed universal life typically limits both gains and losses, while variable universal life offers the opportunity for higher gains as well as losses.

Cryptocurrency Crackdown

US securities regulator sued cryptocurrency platform Coinbase yesterday, the second lawsuit in two days against a major crypto exchange, in a dramatic escalation of a crackdown on the industry and one that could dramatically transform a market that has largely operated outside regulation.

The US Securities and Exchange Commission on Monday took aim at Binance, the world’s largest cryptocurrency exchange. The SEC accuses Binance and its CEO Changpeng Zhao of operating a “web of deception”.

If successful, the lawsuits could transform the crypto market by successfully asserting the SEC’s jurisdiction over the industry which for years has argued that tokens do not constitute securities and should not be regulated by the SEC.

Crackdown Campaign - The two cases are different, but overlap and point in the same direction: the SEC’s increasingly aggressive campaign to bring cryptocurrencies under the jurisdiction of the federal securities laws. The SEC has not previously taken on such major crypto players.

In its complaint filed in Manhattan federal court, the SEC said Coinbase has since at least 2019 made billions of dollars by operating as a middleman on crypto transactions, while evading disclosure requirements meant to protect investors.

The SEC said Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.

US$1.28 Billion At Stake - Coinbase suffered about US$1.28 billion (RM5.89 billion) of net customer outflows following the lawsuit, according to initial estimates from data firm Nansen. Shares of Coinbase’s parent Coinbase Global Inc closed down US$7.10, or 12.1 per cent, at US$51.61 after earlier falling as much as 20.9 per cent. They are up 46 per cent this year.

Broker, Exchange Crackdown - Securities, as opposed to other assets such as commodities, are strictly regulated and require detailed disclosures to inform investors of potential risks. The Securities Act of 1933 outlined a definition of the term “security,” yet many experts rely on two US Supreme Court cases to determine if an investment product constitutes a security.

Tokens constitute securities and has steadily asserted its authority over the crypto market, focusing initially on the sale of tokens and interest-bearing crypto products. More recently, it has taken aim at unregistered crypto broker dealer, exchange trading and clearing activity.

While a few crypto companies are licensed as alternative system trading systems, a type of trading platform used by brokers to trade listed securities, no crypto platform operates as a full-blown stock exchange. The SEC also this year sued Beaxy Digital and Bittrex Global for failing to register as an exchange, clearing house and broker.

The whole business model is built on a noncompliance with the US securities laws and we’re asking them to come into compliance. Crypto companies refute that tokens meet the definition of a security, say the SEC’s rules are ambiguous, and that it’s overstepping its authority in trying to regulate them. Still, many companies have boosted compliance, shelved products and expanded outside the country in response to the crackdown.

Yesterday’s SEC lawsuit seeks civil fines, the recouping of ill-gotten gains and injunctive relief. On Monday, the SEC accused Binance of inflating trading volumes, diverting customer funds, improperly commingling assets, failing to keep wealthy US customers off its platform, and misleading customers about its controls.

Binance pledged to vigorously defend itself against the lawsuit, which it said reflected the SEC’s “misguided and conscious refusal” to provide clarity to the crypto industry. Customers pulled around US$790 million from Binance and its US affiliate following the lawsuit.

FWD Bought Gibraltar BSN Life

FWD Group Holdings has announced its entrance into the Malaysian life insurance market with a strategic, majority investment into Gibraltar BSN Life Berhad, one of the country’s fastest growing life insurers. The transaction involves a few other investors and is expected to close in the second quarter of this year.

Together with other investors, FWD Group will hold an effective 70% stake in Gibraltar BSN, transacted from The Prudential Insurance Company of America. The latter is a wholly owned subsidiary of the US-based and NYSE-listed Prudential Financial. The remaining 30% stake ownership in Gibraltar BSN will be held by the Bank Simpanan Nasional (BSN). FWD Group will partner with BSN following the transaction’s completion to further grow and develop Gibraltar BSN.

Life Insurance Malaysia - 2022 Key Results

Sum Assured - Malaysia’s life insurance industry has recorded a 5.3% rise in sum assured in force amounting to RM1.9 trillion last year versus RM1.8 trillion in 2021 {Life Insurance Association of Malaysia (LIAM)}.

Total Premium - In its 2022 annual report, the total in force premium grew by 3.5% last year to RM44.1 billion from RM42.7 billion in 2021.

New Business Sum Assured - Overall new business sum assured increased to RM497.7 billion in 2022, an increase of 8% from RM461.1 billion in 2021. However, the number of new policies issued fell slightly by 2.1% to 1.8 million compared with 1.9 million in 2021.

New Business Total Premium - New business total premium showed a drop of 6.4% last year, which amounted to RM12 billion compared with RM12.8 billion in 2021.

Claims - the industry recorded a 12.7% increase in claims payout amounting to RM13.4 billion versus RM11.9 billion in 2021, mainly due to higher claims in medical and disability that rose by 33.7% and 20.6%, respectively.

Industry Assessment - LIAM claimed that Malaysia’s insurance industry remained resilient, adapting to new market conditions and continuing to meet the needs of customers despite the challenges brought on by the pandemic.

he insurance industry also saw the laying out of a five-year roadmap and strategic plan to achieve desired targets set under the Financial Sector Blueprint (FSBP) 2022-2026 launched by Bank Negara Malaysia (BNM) last year.

Sahara India Life Insurance - Dried-Up

India's insurance regulator on Friday ordered the takeover of a unit of Sahara India Life Insurance by SBI Life Insurance, following the company's "continuous deterioration of financial position". The Insurance Regulatory and Development Authority of India (IRDAI) on Friday said the life insurance business of Sahara India Life will be transferred to SBI Life with immediate effect.

SBI Life clarified that there will be a transfer of Sahara India Life's policyholder assets and liabilities, but no merger between the two entities. A statement issued by Sahara India Life said the matter is currently under consideration with the Securities Appellate Tribunal and the next hearing is scheduled for June 6.

Acting Against Policyholders' Interests - Sahara India Life has been under the regulator's scrutiny since 2017 for allegedly acting against policyholders' interests. IRDAI had appointed an administrator to run the insurer the same year. The administrator had found that Sahara India Life's promoters were no longer fit to run the company and had allegedly diverted funds. 

IRDAI said that - If the trend is allowed to continue, the situation will worsen and lead to erosion of capital and Sahara India Life Insurance Co may not be able to discharge its liabilities towards policyholders.

As per the regulator's order, SBI Life will take over the liabilities of about 200,000 policies and assets of Sahara India Life. SBI Life will have to integrate the systems for its life insurance business with that of Sahara India Life within one year.

The insurance regulator has formed an internal committee to oversee the acquisition in a "time bound" and "smooth" manner.