What is the Supplementary Retirement Scheme?
Singapore’s Supplementary Retirement Scheme (SRS) is a program set up by Singapore’s Ministry of Finance that encourages both Singaporeans and foreigners to save more for retirement by offering attractive tax incentives to those who participate.
What’s the main difference between CPF and SRS?
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.
What tax reliefs can I get with SRS?
SRS’s main advantage comes down to the tax reliefs 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 the marginal tax bracket, the higher the tax saving.
Foreigners can contribute up to a higher cap ($35,700 SGD), and they can save upwards of $7,854 SGD per annum, totaling nearly $80,000 SGD over 10 years, assuming full SRS contribution during that period..
Withdrawals at retirement (or when conditions are met) are given a 50% tax concession and can be spread over 10 years to minimise taxes.
Individual Income Tax Rates from YA 2017 to YA 2023
| Chargeable Income | Income Tax Rate (%) | Gross Tax Payable ($) |
|---|---|---|
| First $20,000 | 0 | 0 |
| Next $10,000 | 2 | 200 |
| First $30,000 | - | 200 |
| Next $10,000 | 3.50 | 350 |
| First $40,000 | - | 550 |
| Next $40,000 | 7 | 2800 |
| First $80,000 | - | 3,350 |
| Next $40,000 | 11.5 | 4,600 |
| First $120,000 | - | 7,950 |
| Next $40,000 | 15 | 6,000 |
| First $160,000 | - | 13,950 |
| Next $40,000 | 18 | 7,200 |
| First $200,000 | - | 21,150 |
| Next $40,000 | 19 | 7,600 |
| First $240,000 | - | 28,750 |
| Next $40,000 | 19.5 | 7,800 |
| First $280,000 | - | 36,550 |
| Next $40,000 | 20 | 8,000 |
| First $320,000 | - | 44,550 |
| In excess of $320,000 | 22 | - |
Source: Inland Revenue Authority of Singapore (IRAS)
How do you open an SRS account?
You can open an SRS account with DBS, OCBC, and UOB, and then instruct your bank how you want 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 will need to get in touch with the fund manager directly.
Should you invest SRS contributions?
Investing your SRS funds is a way to make the most of your SRS contributions.
Here’s how much more you could earn if you invest SRS (for Singapore citizens and PRs only):
| If you put aside the maximum SRS contribution amount of… | $15,300 | $15,300 |
|---|---|---|
| For… | 20 years | 30 years |
| You’d have… | $306,000 | $459,000 |
| But if you invest* it, you’d have… | $562,819 | $1,209,590 |
*Assumes 6% net returns per annum. This rate is for illustrative purposes only and does not reflect actual returns.
There’s a wide range of financial vehicles to invest your SRS funds once you open your SRS account. These vehicles include stocks, bonds, fixed deposits, unit trusts, and annuity plans. StashAway is one of the many providers of SRS investment options.
Maximum SRS contribution
Singaporeans and PRs can contribute up to $15,300 SGD to their SRS bank accounts per year while foreigners are capped at $35,700 SGD per year.
When can you withdraw your SRS funds?
When you reach the statutory retirement age, 63, Singaporeans and PRs can withdraw from their SRS accounts over a period of up to 10 years, starting on the date of the first withdrawal. For foreigners, withdrawals without penalties are possible after 10 years of opening the SRS account.
50% of every withdrawal will be subject to tax. 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 will face a 5% penalty, and in addition, 100% of the early withdrawal would be subject to tax.
Should you have an SRS account?
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:
SRS locks in your funds
Are you certain that you won’t need to touch the money before you can withdraw it penalty-free? For Singaporeans and PRs, that is the statutory age of 63, and for foreigners, that’s 10 years from the first deposit. Given the penalties that come with an early withdrawal, make sure you’re confident that you won’t need to tap into this account early.
SRS sees the greatest tax benefits with higher income levels
Although anyone can contribute to an SRS account, those who earn higher income see the greatest tax benefits because of their higher marginal tax rate.
SRS is suitable if you're in Singapore for the medium- to long-term
If you’re a foreigner, you should be confident that you’ll be living in Singapore for the medium term, as you don’t want to withdraw before your maturity date (i.e, 10 years from your first deposit).
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