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Tax Benefits of the Supplementary Retirement Scheme (SRS)

The Supplementary Retirement Scheme, or SRS, is a tax relief and tax deferral plan that incentivises saving for your retirement. But before you open an SRS account, you should familiarise yourself with its benefits.

To figure out if you should have an SRS account in the first place, check out: Should You Have a Supplementary Retirement Scheme Account?

Simply put, here are the tax benefits you get with SRS:

Contributions to your SRS account are tax deductible, subject to a cap on personal income tax relief of $80,000 SGD per tax year.
Withdrawals at retirement (or when the withdrawal conditions are met) are given a 50% tax concession.

Decrease your taxable income with SRS

Singaporeans and PRs can contribute up to $15,300 SGD per annum towards their SRS accounts. Furthermore, they can deduct this amount from their taxable income. To maximise the tax savings available through SRS, contribute the maximum of $15,300 SGD every year. Just one thing - SRS contributions are flexible, which means you can make your contributions anytime and for any amount you deem fit, and not necessarily yearly.

These contributions to SRS can decrease your tax bill by $1,700 SGD to $3,366 SGD each year, depending on your tax bracket. For example, if your income tax bracket is 15% to 22%, your $15,300 SGD contribution immediately saves you $2,300 to $3,300 SGD per annum. That adds up to substantial tax savings over time.

Tax benefits for Singaporeans and PRs (assuming full SRS contribution)

Annual gross salary	Marginal tax rate	Tax savings per annum	Tax savings after 10 years of SRS contributions	Tax savings after 20 years of SRS contribution	Tax savings after 30 years of SRS contributions
$100,000	11.5%	$1,760	$17,600	$35,200	$52,800
$150,000	15.0%	$2,295	$22,950	$45,900	$68,850
$250,000	19.5%	$2,984	$29,840	$59,680	$89,520
$350,000	22.0%	$3,366	$33,660	$67,320	$100,980

(Assumes $15,300 SGD annual contribution for the full 10, 20, and 30 years length.)

Tax reliefs for foreigners (assuming full SRS contribution)

Foreigners can contribute up to $35,700 per annum, as they don't have access to CPF. The tax savings here, assuming a full SRS contribution for ten years, can amount to upwards of $7,000 SGD per annum, and almost $80,000 SGD over ten years. Foreigners also get more flexibility on withdrawals: they can withdraw the lump sum after ten years of opening an account without penalties, regardless of their age.

Annual gross salary	Marginal tax rate	Tax savings per annum	Tax savings after 10 years of SRS contributions
$100,000	11.50%	$3,399	$33,990
$150,000	15%	$5,155	$51,550
$250,000	19.50%	$6,833	$68,330
$350,000	22%	$7,740	$77,400

SRS withdrawals at retirement have a 50% tax concession

After the age of 63, you can withdraw your funds for up to ten years, and only 50% of each withdrawal is taxable. So, if in a given year you withdraw $40,000 SGD, $20,000 SGD is subject to tax; and if you don’t have any other personal income, this amount would be tax-free, as the first $20,000 SGD of personal income in Singapore isn't taxable.

Currently, personal income starts getting taxed at $20,000 SGD. This means that if you don't have any other taxable personal income, you can withdraw up to $40,000 SGD per year tax-free from your SRS account, for ten years.

Therefore, the best strategy is to minimise any income tax during those ten years is by spreading out the withdrawals when you don't have any other income. But if you have other income, simply withdraw less in the years when you receive less income.

Is SRS for everyone? No, it’s not.

SRS tax benefits are particularly significant for individuals in higher tax brackets. On top of that, you'd have to be OK to leave your money in the scheme until retirement age or until you've met the conditions for withdrawal. Higher earners are therefore more likely to be confident of their liquidity situation and less likely to withdraw their funds early.

SRS is one way to get the most out of your tax savings. Another way is to invest your funds. Here's where you can learn more about investing your SRS.

Want to learn more about investing your SRS funds with StashAway? WhatsApp us here.

Michele Ferrario

Co-founder and CEO

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