Your SRS deserves better than 0.05% p.a.

The end of the year is just around the corner. For most of us, that means Christmas shopping, winding down with family and friends, and of course, taxes.

Around this period, you might be thinking about maxing out your SRS (Supplementary Retirement Scheme) contribution for the year. Singaporeans and PRs get S$15,300 in tax relief, while foreigners get S$35,700. These are meaningful savings, especially if you're in a higher tax bracket.

Many people stop there. They deposit into their SRS account, then leave it to earn 0.05% p.a. until retirement. According to the Ministry of Finance, 19% of SRS funds still sit in cash, or about S$4 billion. In this Reserve Letter, we’ll explore an asset class that can fit both your retirement timeline and maximise the potential of your SRS funds – private credit.

Why private credit works for retirement savings

Your SRS funds don't need to sit idle. The same tax benefits apply whether you're earning 0.05% in cash or 9% in other assets. The Ministry of Finance allows SRS funds to be invested across various asset classes, including private markets.

The tax structure of SRS already recognises what matters for retirement savings: letting money compound over long periods without interruption. You get tax relief upfront, your gains grow tax-free during accumulation, and you get a 50% tax concession when you withdraw at retirement. This structure is designed for long-term growth.

Private credit aligns with that structure better than most alternatives. It’s an asset class that involves debt financing by non-bank lenders, and delivers consistent returns while maintaining a lower risk profile. It's about matching the right asset class to the right time horizon, then letting compounding do the work.

The asset class has delivered returns between 8% and 10% annually while exhibiting lower volatility than equities, historically speaking. In 2022, when both stocks and bonds fell in tandem, private credit funds delivered positive returns. That resilience matters when you're building retirement savings over decades.

The compounding effect becomes more pronounced as your time horizon extends. If you contribute S$15,300 annually to your SRS account and invest it at 9% returns, you'll have approximately S$2.4 million after 30 years. The same contributions left in cash at 0.05% gives you S$460,000.

Now let’s add tax savings to the equation. For someone earning S$400,000 annually in Singapore, the tax rate on chargeable income is 22%. Maxing out SRS at that tax bracket saves approximately S$3,366 in taxes each year for citizens and PRs, or S$7,854 for foreigners.

If you invest those savings alongside your SRS contributions at the same 9% return, you're compounding on two fronts. Over 30 years, a citizen or PR would have approximately S$2.9 million total: their S$2.4 million SRS portfolio plus S$540,000 from reinvested tax savings. These tax benefits aren’t just a one-time deduction, they’re additional capital working for you every single year.

When it comes to retirement, stability matters more

Equity markets offer higher potential returns, but their inherent volatility can create issues for retirement planning. If you need to start drawing down your SRS when you’re 63, and the market goes through a pullback that year, your retirement income takes a permanent hit.

Private credit provides steadier cash flows. The loans pay regular interest, and the senior secured structure means recovery rates are higher when borrowers face difficulties. Between 2000 and 2024, private credit showed the highest consistency of returns across market cycles compared to other private market asset classes.

This stability matters for portfolio construction. Private credit's steady cash flows and lower volatility provide ballast when equity markets swing. The diversification benefit is real: you're adding an asset class with different return drivers and risk characteristics from stocks and bonds. For those closer to retirement, that stability becomes even more critical. An asset class like private credit bridges the gap between growth and preservation.

Time is your advantage

Private markets have historically been the domain of institutional investors, with high minimums and long lock-ups. We’ve made them accessible through our partnership with Hamilton Lane, a global private markets specialist with over 33 years of experience and nearly US$1 trillion in assets under management. You can invest your SRS funds in private credit directly on our app.

The real opportunity with SRS isn't just the upfront tax relief. It's the combination of tax-free growth during accumulation, the 50% tax concession at withdrawal, and decades of compounding in between. Adding an asset class that delivers consistent returns amplifies the entire strategy.