Another plus point of the PPF is that employers can claim tax relief for contributions.
However, what may not sit well with the people is that the scheme may be privatised.
Deputy Finance Minister Datuk Donald Lim Siang Chai did not discount the fact that the government would outsource the scheme. However, he assured the public that the PPF will be monitored by his ministry.
"It is still in the proposal stage and the government is waiting for feedback from both (the) public and private sectors before it is launched next year," he said after attending the 4th Global Bio-Herbs Economic Forum, at the Palace of Golden Horses yesterday.
He said details were still sketchy but explained that an investment committee would be appointed to oversee the PPF’s activities. "There will be an investment committee and there will be representatives from various sectors, including from the government, to monitor the growth," he said.
Lim said while the committee was similar to the investment committee in the Employees Provident Fund (EPF), the PPF will be more flexible than the EPF.
"Contributors can contribute based on how much they want to and when they are comfortable to do so.
"For instance, a businessman may want to save money but he cannot be on schedule with his business, so he can still hold on to it and put his money when he is able to," he said.
Lim said at present it was compulsory for only wage earners to make EPF contributions while the self-employed did not have any government-initiated scheme to save for their old age.
"If you save in the bank, you get about 2.5% to 2.75% in interest (a year) but if you keep (it) in this special pension fund, you would be able to earn about 5% to 5.5%.
"This would be good for the private sector employees and self-employed in their retirement age as the returns would be double," he said.
He said EPF had 12.6 million members but only six to seven million were active, excluding the one million civil servants.
"There are five million people who do not have any savings for their old age," he said.
Lim also said the scheme will feature some sort of tax relief.
"We can consider a full tax relief after we obtain all the feedback from the various groups," he said.
Since the PPF was announced last Friday, several quarters have commented that there should be full tax relief and the fund should not be left in the hands of profit-driven companies.
Prime Minister Datuk Seri Najib Abdul Razak in tabling the Budget had said that the existing tax relief of up to RM6,000 for contributions to the EPF will be extended to include the PPF.
The MTUC cautioned that leaving the scheme in the hands of the private sector was attracting danger, citing the United States, Argentina and Chile where the governments had to step in after mishandling by the private sector.
The Malaysian Employers Federation had also commented that the income tax relief was not attractive to the target group as there were no incentives.
"They should be given full tax exemption instead of just up to RM6,000 if the government wants to encourage people to contribute to the fund," said its executive director Shamsuddin Bardan.
The insurance industry also seemed keen to muscle in on the scheme, with the Life Insurance Association of Malaysia saying the proposal was expected to spur the development of retirement schemes developed by insurance companies.
