Lock in your tax benefit from SSPN-i saving NOW!

Hands up, if you have heard of SSPN-i?…

Hands up, if you have heard of PTPTN?…

My guess is, if you are a Malaysian living in the homeland, I would be surprised if you do not know what PTPTN is. Perbadaan Tabung Pendidikan Nasional (PTPTN or National Higher Education Fund Corporation) is the body that Malaysian students studying in accredited tertiary institutions apply for funding for their studies. One cannot help but notice news about PTPTN due to its defaulters issues.

Wait! What is SSPN-i? Is it related to PTPTN in any way? You may want to ask.

In fact SSPN-i (Skim Simpanan Pendidikan Nasional – National Education Saving Scheme) is the saving scheme of the PTPTN. It encourages parents to save for their children tertiary education. In fact, since Jan 01, 2012 tertiary students will need to have a SSPN-i account before they are eligible to apply for any PTPTN loans. SSPN-i pays dividend yearly which hovered between 2.5% to 4.25% with the latest figure for 2015 at 4%. Not impressed? But this should not be the main reason for you to invest for your children tertiary education fund in SSPN-i, especially if you are paying income tax. The key attraction to investing in SSPN-i for a tax payer like me is in the RM6,000 maximum amount of tax relief per year for net deposit in your child’s SSPN-i account.

You need not be a mathematics boffin to work out that the RM6,000 tax relief will count for RM1,200 for me as my average tax rate is around 20% (… gee am I revealing too much here?). Look at it another way, I would “gain” RM1,200 because I had deposited RM6,000 in 2016 to my daughter’s SSPN-i account. I would still gain a tax-free dividend of around 3 – 4%, which will be the same as what one would get from a normal bank saving account. 23% return on my investment with 20% “guaranteed” and “immediate” when I compute my tax for 2016 next year is nothing you can get legally anywhere in Malaysia. SSPN-i is also a government guaranteed investment. It is a no-brainer really, that is if you are liable to pay income tax for 2016.

In my case, I have just deposited another RM3,000 today adding to the RM3,000 I had already invested in October 2016 to  maximize my “returns”. As my wife’s business earning for 2016 is very minimal, and we have only one child who is a minor (thankfully our son has graduated from university last week!), we could not take full advantage of the “RM6,000 per child” SSPN-i tax relief. However if you have a dual-income  family where both spouses pay income tax (i.e. each of you earn more than the minimum “qualifying” annual income to earn the privilege to pay income tax), and you have children, you will do nothing better than to raid your children’s piggy bank, saving accounts etc. and invest to the maximum sum.

As the profile image has shown, if you hurry to deposit cash in related bank (I went to Maybank, USJ Taipan), a nice PTPTN staff will be on hand to help you with your SSPN-i if you need one and he/she will give you a nicely shaped “golden egg” as a piggy bank for your child and a very good quality recycle bag for mom or dad. Do hurry, at the time of writing (Dec 22,2016) there are only five more banking days left! If you have already opened SSPN-i accounts, you need not go the bank to deposit, Maybank and CIMB online banking portals also accept your money online. Whatever you do, please beat the Dec 31, 2016 deadline!

Since 2015, there is another type of SSPN-i account called SSPN-i Plus which comes with life insurance (Takaful) coverage. However you can only gain the additional RM6,000 tax relief (in addition to the RM6,000 for SSPN-i) if you have not topped the Employee Provident Fund /Life insurance quota of RM6,000. And for SSPN-i there is some monthly commitment of a minimum of RM50. So for most income taxpayers, SSPN-i may be the better choice. More details are found in this Lowyat discussion forum.

Wishing all my readers Merry Christmas (for those who are celebrating) and a happy and prosperous 2017.

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