7B.9 PRS Withdrawals: Pre-Retirement, Retirement, Permanent Departure, Incapacity and Death
Key Takeaways
Pre-retirement withdrawals from sub-account B can be made once every calendar year from each PRS Provider, only after the member has been a member for at least one year.
The PRS Provider deducts a flat 8% tax penalty from pre-retirement withdrawals before paying the member, on behalf of the Inland Revenue Board.
The 8% penalty does not apply to withdrawals on death, permanent departure from Malaysia, permanent total disablement, serious disease or mental disability, or for healthcare or housing purposes.
Withdrawals on permanent departure from Malaysia, or for permanent total disablement, serious disease or mental disability, must be of the full amount in both sub-accounts.
After a member's death, the PRS Provider must obtain the PPA's prior authorisation and then pay the proceeds within seven business days.
The Withdrawal Map
| Circumstance | Sub-account | Extent | 8% tax penalty? |
|---|---|---|---|
| On reaching retirement age | A and B | Partial or full | No |
| Pre-retirement withdrawal for any reason | B only | Partial or full | Yes |
| Death of the member | A and B | Partial or full | No |
| Permanent departure from Malaysia | A and B | Full only | No |
| Permanent total disablement, serious disease or mental disability | A and B | Full only | No |
| Healthcare (member or immediate family; illnesses listed in Schedule J of the PRS Guidelines) | B only | Partial or full | No |
| Housing | B only | Partial or full | No |
Source: PRS Guidelines (R7-2024), paragraphs 11.37 to 11.39A, which match the study guide's list.
Pre-Retirement Withdrawals
- Members may withdraw from sub-account B (30% of contributions) for any reason.
- They may withdraw a lump sum or any amount, from one or several funds of a provider, once every calendar year from each PRS Provider. The housing and healthcare withdrawals count within this once-a-year allowance.
- The first withdrawal can only be made one year after the initial contribution (by the member or an employer).
- The member fills in the provider's form; the provider verifies it (for example, that it is the first withdrawal that year).
- The provider does not need the PPA's prior authorisation; it instructs the Scheme Trustee to cancel units.
- The provider collects the tax penalty on behalf of the Inland Revenue Board, deducting a flat 8% from the amount withdrawn before paying the member.
Worked example (study guide)
Jon started contributing to PRS Alpha on 1 January 20X3. By 31 December 20X4 he has RM7,000 in sub-account A and RM3,000 in sub-account B, with no withdrawals.
| Scenario on 1 January 20X5 | Withdrawal | Penalty | Jon receives |
|---|---|---|---|
| Pre-retirement withdrawal of the whole of sub-account B | RM3,000 | 8% = RM240 | RM2,760 |
| Partial withdrawal of RM1,000 from sub-account B | RM1,000 | RM80 | RM920 |
| Emigrates permanently to Australia | Must withdraw all RM10,000 (A and B); partial not allowed | None | RM10,000 |
Information on consolidated holdings or total sub-account B balances comes from the PPA; details of pre-retirement withdrawals at a particular provider come from that provider.
Post-Retirement Withdrawals
From retirement age (55) a member can withdraw from both sub-accounts without penalty, as a lump sum or periodically, or simply stay invested. The request goes directly to the PRS Provider; PPA prior authorisation is not needed, but the provider must notify the PPA of the withdrawal.
Permanent Departure from Malaysia
- Malaysians may withdraw if they emigrate permanently.
- Foreigners may withdraw on cancellation of their work permit or permanent residency.
- The withdrawal must be of the full amount in both sub-accounts. The PPA's website lists the documents required.
Death of a Member
- A nominee (section 7B.11) or the member's personal representative (executor or administrator) applies to the PRS Provider, whether or not a nomination exists.
- Supporting documents (for example the death certificate, probate, letters of administration or Sijil Faraid) are sent to the provider, which submits them to the PPA.
- The provider must obtain the PPA's prior authorisation before instructing the Trustee to cancel units, then pay the proceeds within 7 business days of receiving it.
Advising on Withdrawals: Three Cases
| Member's situation | Sensible guidance |
|---|---|
| Encik Daud is 54 years and 10 months old and wants his whole PRS balance for a car | Before 55 only sub-account B is available, and an 8% penalty applies. Waiting two months until retirement age lets him withdraw both sub-accounts with no penalty |
| Puan Ros, 40, needs money for her mother's treatment for an illness listed in the PRS Guidelines | A healthcare withdrawal from sub-account B for an immediate family member is penalty-free, but it uses her once-a-year withdrawal allowance with that provider |
| Mr Ong, 35, already made a pre-retirement withdrawal from Provider P this year and now wants a housing withdrawal from P | He has used P's allowance for this calendar year; he must wait until next year (or use sub-account B with a different provider he has been a member of for at least a year) |
The Consultant should also remind members that withdrawing early reduces the money compounding for retirement, which is the purpose of PRS.
Who Authorises What
| Withdrawal | PPA prior authorisation? |
|---|---|
| Pre-retirement (including housing and healthcare) | No |
| Post-retirement | No (provider notifies the PPA afterwards) |
| After death | Yes |
| Cooling-off refund | Yes (PRS Guidelines paragraph 11.09) |
A member withdraws RM5,000 from sub-account B for a holiday before reaching retirement age. How much does the member receive?
RM4,600
RM4,750
RM5,000
RM4,500
Which pre-retirement withdrawal is exempt from the 8% tax penalty?
To invest the money in a higher-returning unit trust
To pay for a family holiday overseas this year
To pay off a personal loan taken for the member's wedding expenses
For the member's own treatment of an illness listed in Schedule J
A member is emigrating permanently and wants to withdraw only half of her PRS savings. What do the rules say?
She may take half from sub-account B with 8% penalty
She must wait until she reaches 55 to withdraw
She may withdraw any amount she likes without penalty
She must withdraw everything, penalty-free
Sections you finish are checked off in the contents.