Monday, December 9, 2013

Does it worth to put saving in Skim Simpanan Pendidikan Nasional (SSPN-i)?

Now has entered the last month for our income tax planning for year 2013, and no doubt SSPN-i which can bring up to RM6,000 tax relief is one of the major consideration, especially for tax payers who fall in the highest income tax bracket.

The National Education Savings Scheme (Skim Simpanan Pendidikan Nasional, SSPN-i) is setup by the National Higher Education Fund Corporation (Perbadanan Tabung Pendidikan Tinggi Nasional, PTPTN) for the purpose of higher education.

PTPTN is an education financing scheme established for the purpose of providing education financing (government study loan) to Malaysian students pursuing studies in local public or private institutions of higher education.

Over the years, PTPTN has been facing difficulty in getting back the loan repayment from graduated students, and there are RM2.3 billions of unsettled loan as reported in September 2013.

As such, there is little doubt to view SSPN-i to be setup to maintain the cash flow of PTPTN, or new students might not be able to obtain loan from PTPTN as their cash flow dried up.

Back to our question. Does it worth to put saving in Skim Simpanan Pendidikan Nasional (SSPN-i)?

From the income tax saving perspective, if you are in the highest income tax bracket of 26%, and you deposit RM6,000 into the SSPN-i account for your children, you will enjoy a tax relief of up to RM6,000 x 26% = RM1,560.

On top of that, SSPN-i will give tax exempted dividend of about 4% every year. If you only deposit the money in December, you won't get much dividend for this year, and you will need to wait for another year to get your first full-year dividend.

As long as the SSPN-i account has savings of RM1,000 and above, there will be free Group Takaful insurance as below:

  1. Coverage of RM to RM (dollar to dollar) of up to RM50,000 (general insurance)
  2. Death benefit / compensation for the depositor (RM2,000) and the beneficiary (RM500)
The depositor must be 18-65 years, and the beneficiary must be 1 day to 28 years.

There is also a matching grant of up to RM10,000 if your family income is below RM2,000 by the time your child is accepted into and registered with a higher education institute recognised by the government.

If you want to enjoy the tax relief again next year, you need to top up your SSPN-i account with additional savings.

Note that once the money is put inside SSPN-i, it is very difficult to withdraw it. You can only withdraw once per year, up to RM500 or 10% of the savings (whichever is lower). You can only close the account with 100% withdrawal when:
  • Your child is offered a place in any higher learning institution
  • Your child has voluntarily withdrawn from the education system
  • Your child has been expelled for a specific reason
  • Suffering from an illness certified by a doctor as being incurable
  • Experience total permanent disability as certified by a doctor;
  • Death of the child
  • Death of the depositor
Assuming that you keep your RM6,000 in SSPN-i account for 20 years, your total return, including the income tax savings of 26% relief, is about RM8,200.


In order to see whether it worth or not to put the savings in SSPN-i, I have expanded the table above to show the accumulated gain every year, and the annualized return in percentage.
 

As you can see from the table above, it is a good choice to put saving in SSPN-i if your child is above 15 years old and going for tertiary education in 5 years time. You will get the annualized return of approximately 8.6% and above based on 4% dividend rate.

After that, your annualized return will drop due to the low dividend rate, but still comparable to the return rate of Employees' Provident Fund (EPF) which estimated to be around 6% annually.

However, take note that the SSPN-i dividend between 2009-2011 are below 4%:
  • 2009: 2.5%
  • 2010: 3.25%
  • 2011: 3.75%
  • 2012: 4.25%
So it is not guaranteed you will get 4% dividend every year.

What if the dividend rate is estimated at around 3% per year? The table will be as below:


It is still a good choice to put your money in SSPN-i with an estimated dividend rate of 3% per year, for a period of below 5 years. More than that, there are a lot of investment instruments for your consideration which can give better return.

What if the estimated dividend rate dropped to 2%? The table will be as below:


Well, I think you won't consider it at that kind of dividend rate if your child is less than 10 years old now.

You might probably be interested to also read about:

18 comments:

Vimala Devi Vijayan said... Reply To This Comment

It is now the beginning of the 2nd quarter of the Y2014, and I dont see a single cent paid into my kids SSPN account..the so called dividen. When contacted they replied the MOF is yet to announce the dividend. Where can I seek for answers? What is taking the MOF so long?

abangJOE said... Reply To This Comment

We can always close account to have 100% withdraw if interest rate went down or bad, correct?

Shahul Hameed said... Reply To This Comment

Hi there.. how about saving RM6000 every year ? (I am not into getting the 3% or 4% divident, but getting the tax rebate is the aim here). Please advise. Thanks.

Voyager8 said... Reply To This Comment

@Shahul Hameed

Then you are using RM6000 to exchange for RM1560, and your RM6000 will not locked in for a very long period of time.

doreen said... Reply To This Comment

Mean if have a kid below age of 10 not advisable to consider this ? Pls advise

Voyager8 said... Reply To This Comment

@doreen


When the actual return with SSPN-i is lower than bank's FD rate, you might as well put the money in FD.

Once went in, the money in SSPN-i is very much more difficult to take out than FD. (read the withdrawal conditions in the main article above)

GeminiHBO said... Reply To This Comment

Hi, would appreciate your help to clarify:
1) What does it mean 1 day to 28 years & "beneficiary"?
2) Supposed, I have a child in her 18 & now in a private school for A-Level, I could deposit RM6,000 this Dec to enjoy the tax relieve of RM1,560 then when come next year when she is being offered a degree program in any education institute, I can withdraw 100% of the money right?
That seems to be a good deal for me if it is true.

Voyager8 said... Reply To This Comment

@GeminiHBO

1. For the free Takaful insurance, the beneficiary is the person who will get the insurance money when you die or have TPD.

The beneficiary must be of age 1 day (new born) to 28 years old. Cannot be older than 28 years old.

2. Yes, I think so.

Unknown said... Reply To This Comment

I am the single owner of the SSPN account (not share), already working, intend to withdraw 100% (More than RM3k). What is the meaning of " Your child has voluntarily withdrawn from the education system"? I want to withdraw fast, what is the specific effective way to do so?

Voyager8 said... Reply To This Comment

@Unknown

I think it means you don't intend to borrow any PTPTN in the future, and/or you have stop studying due to own reason.

You can call them at 603-20804455 for more information.

Lim Suat Hong said... Reply To This Comment

I have not received any letters from SSPN for years, have hard time to trace whether I have deposited any amount for present years, Hope that SSPN will improve their online account checking services in the near future

Voyager8 said... Reply To This Comment

@Lim Suat Hong

I don't think I have received any printed statement from SSPN too.

You can check your statement online and also print out the Penyata Hasil for income tax relief online.

My experience is, the online statement is updated within a few days after you bank in the money.

Please refer to:
Online SSPN-i Statement of Account (for income tax relief)

Jen said... Reply To This Comment

If my son offer higher learning in the 1st year, but I manage to support and no withdrawer required , but when come to 3rd year, I may need the money, can I withdraw 100% on 3rd or 4th year of his studying and close account , if yes, what type of document require for account closure and there is only one institution offer letter in the first year, will the first year offer letter accept for account closure after studying for 3 to 4 years?

Voyager8 said... Reply To This Comment

@Jen

You can use the link below to make any enquiry:

http://icare.ptptn.gov.my/eApps/sdmscasepool/SdmsCasePool/add.do

Athirah said... Reply To This Comment

@Voyager8 what do you mean by locked in for a very long period of time?

sspn-i.com said... Reply To This Comment

Good news to all, opening of new SSPN-i Plus can be done via online at SSPN-i.com. If you do so before 31/05/2016 you shall be entitled for lucky draw to win Honda HRV, BMW 320i or even apartment worth RM500 thousands.

Amirtha Rengasamy said... Reply To This Comment

If tax exemptions is not in consideration Might as well open up maybank yippe club account for your child as it offers 3% dividend per annum and one withdrawal is allowed every month. Dividend is paid off every 6 monthly.

Get Insured said... Reply To This Comment

As far as I know SSPN-I holder gets 3% dividend on balance every year. Same as bank interest, but with some takaful insurance coverage and tax rebate. For SSPN-I plus the benefit is same as SSPN-I but get more Takaful coverage benefits. More details here: https://sspniplusonline.ptptn.gov.my/sspniplusonline/?id=000003621

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