Co-founder and CEO
Singapore’s Supplementary Retirement Scheme (SRS) is a program created by Singapore’s Ministry of Finance. It encourages both Singaporeans and foreigners to save more for retirement by offering attractive tax incentives to those who participate.
Unlike CPF, SRS is entirely voluntary. Additionally, an SRS account holder can choose to invest the SRS funds from a wide list of approved options, while the majority of CPF investments are managed by the CPF Board.
Singaporeans and PRs can contribute up to $15,300 SGD per year to their SRS bank accounts, and foreigners can contribute up $35,700 SGD per year.
SRS’s main advantage comes down to the tax benefits it offers. Contributions are fully deducted from your tax bill each year.
Singaporeans who max out their SRS contributions can decrease their taxes by up to $3,366 SGD each year. And the higher their marginal tax bracket, the higher their tax saving.
Foreigners can contribute up to a higher cap of $35,700 SGD and can save upwards of $7,854 SGD per annum. These savings total nearly $80,000 SGD over the course of 10 years, assuming that they maximise their SRS contributions during those 10 years.
Participants who withdraw their SRS at retirement, or when conditions are met, are given a 50% tax concession. They can also spread out their withdrawals over 10 years to minimise the taxes.
You can open an SRS account with DBS, OCBC, and UOB, and then instruct your bank on how you want them to invest your contributions.
Investment options range from products distributed by the bank itself to others provided by third-party fund managers approved by the Ministry of Finance. If you want to invest in a product not distributed by your bank, you'll need to get in touch with the fund manager directly.
Investing your SRS funds is a way to make the most of your SRS contributions. Otherwise, your contributions will be losing value as they get eaten up by inflation.
If you contribute the full $15,300 SGD per annum every year for 20 years, that would be worth $306,000 SGD after 20 years. But, if you invested it and earned 5% net returns per annum, you'd earn $504,850 SGD in 20 years. And if you contributed the max amount for 30 years, you'd have $459,000 in savings. But again, if you invested those contributions each year and earned 5% net returns per annum, you’d have $1,003,436 SGD in 30 years.
There's a wide range of financial vehicles for your to invest your SRS funds in once you open an account. These vehicles include stocks, bonds, fixed deposits, unit trusts, and annuity plans. StashAway is one of the many providers of SRS investment options.
For Singaporeans and PRs, you can withdraw from your SRS accounts once your reach the statutory retirement age of 62. You'll then be able to make your withdrawals over a period of up to 10 years, starting on the date of your first withdrawal. It's also worth remembering that the government may raise the retirement age in future. So, investing even just $1 SGD today is enough to be eligible to withdraw at the current set retirement age.
For foreigners, you can withdraw without penalty after 10 years, and that 10-year period starts when you first open an SRS account and deposit at least $1 SGD. So, the earlier you open an account, the sooner you'll be able to withdraw your funds.
Fifty percent of every withdrawal will be subject to tax. That's why timing withdrawals properly is the key to maximising the tax advantages from the SRS contributions. This means that you should withdraw when your marginal tax rate is lowest.
It’s important you only contribute to SRS if you’re certain you won’t need the funds until retirement. Because, if you don’t meet the early withdrawal conditions, you'll face a 5% penalty, and 100% of the early withdrawal will be taxed.
This isn’t a simple 'yes or no' question. There are a few things you need to consider when determining whether an SRS account is right for you:
Here's what else you should consider when deciding on whether you should have an SRS account.
Just invest your SRS funds in the StashAway app, and then enter the voucher code: SGSRS2021.
You'll need to apply your voucher before scheduling your SRS deposit. Then, we’ll activate your voucher 1 to 2 business days after we receive your SRS deposit.
Terms and conditions:
You may also be interested in: