PRS (Part 4): Private Retirement Schemes in Malaysia – The Numbers
In Part 4 of iMoney’s PRS Series, we examine pricing and performance for PRS plans, which are determined by something called Net Asset Values (NAV).
NAV is basically the net value of the portfolio of a PRS plan divided by the number of outstanding units. But if this doesn’t make sense to you, don’t worry. As a PRS contributor, all you need to know is that NAV is a really important number that is tabulated by PRS providers on a daily basis, which can affect your PRS contribution in the following 4 ways:
1) When You Contribute, You’re Actually Buying Units Based on NAV
First of all, understand that when you decide to make a contribution to a PRS plan, you are actually buying a certain number of units using this formula: Number of Units = Your Contribution / NAV
2) NAV Allows You to Track the Performance of Your PRS Account
To track the value and performance of your PRS account, simply compare your PRS plan’s current NAV against the NAV when you first contributed to the plan.
3) NAV Affects New Contributions to Your PRS Plan
PRS contributors may, at your discretion, choose to increase your contributions to a PRS plan. In such a case, the number of units you will be buying will depend on the NAV at the time.
4) Dividend Changes the NAV of Your PRS Plan
Once in a while, your PRS provider may declare payment of dividends on your PRS plan. When this happens, the NAV of your PRS plan is reduced based on the value of the dividends.
So, these are the four basic things that you’ll need to know about PRS pricing and numbers. As you add on contributions and plans, things can get a little more complicated. But once you understand how the calculation works, you will be able to monitor your accounts and maximise your earnings better. Now, to learn about the risk of PRS plans, proceed to Part 5 of iMoney’s PRS Series.