Supplementary Retirement Scheme (SRS)
Saving for our golden years is something we should prioritise in our income-earning years. However, as most people at this stage also have more immediate financial goals, retirement planning often gets delayed. That’s where the SRS comes in.
|Maximum Yearly Contribution||Amount in SGD|
|Singaporean / Singapore PR:||S$15,300|
What is SRS?
The SRS is an initiative by the Singapore government to give Singaporeans and residents a pathway to enjoy near-term tangible benefits while they save towards their retirement years.
With SRS, you can enjoy tax savings on your next assessment year. At the same time, your fund can be
Run by the private sector, SRS complements the Central Provident Fund (CPF) which is meant to provide for your housing and medical needs and for basic living needs after retirement. Unlike the CPF scheme, participation in the SRS is voluntary. SRS accounts receive dollar-for-dollar tax relief up to $15,300 for citizens and PRs and $35,700 for foreigners. In addition, your contributions can be put to work when you use your funds to purchase a range of quality investment instruments.
How Much Can You Save?
An illustration of how the SRS helps you save:
Less Personal Reliefs
(Earned Income, CPF, Qualifying Child, Parent, etc.)
|Without SRS Contribution||With SRS Contribution|
|Total Tax Payable||S$4,500||S$2,979|
|Potential Tax Savings||
You save 33% more tax this year.
The above table is for illustration purpose only.
How SRS Makes Your
Savings Work Doubly Hard for You
1. The main benefit of SRS contribution is tax-relief.
Based on the illustration, as a Singaporean or PR, you can save $1,521 in taxes each year by contributing at the maximum of $15,300 to SRS. Every dollar put into the SRS account will enable one to reduce the taxable income by a dollar, subjected to a cap of $15,300 a year.
2. SRS funds can be used for further investments.
Who Benefits the Most from SRS?
More than half of SRS account holders in 2014 were between the ages of 36 and 55. And these are the people who probably earn over S$40,000 a year, the tax savings earned will be significant.
A Good Scheme but What Is the Downside?
When the funds in the SRS account are not invested, it only generates an interest rate of 0.05%. Over time, the funds in the SRS account will lose value as the return of 0.05% is lesser than Singapore’s inflation rate. In fact, 1 in 3 people who contribute to their SRS account are not taking advantage of the opportunity to invest their funds and grow their portfolio. So while the SRS is a good scheme, it is important that your funds are invested for the opportunity to earn more favourable returns.
What Can You Invest in Using Your SRS Funds?
Investing your SRS contributions is a great way to grow your retirement savings. One could choose from a wide range of financial products including:
- Singapore Government Securities (SGS)/
Singapore Savings Bonds (SSB)
- Fixed Deposits
- Single Premium Retirement Plan
- Unit Trusts
- Real Estate Investment Trusts (REITs)
Everyone has different financial goals and retirement needs. At IPP, our experienced advisers can help you better understand how SRS can be aligned to help you meet your goals.
Our advisers can help you develop your wealth strategies whether your goals are to protect, accumulate, manage, grow or distribute your wealth. Working closely with you to understand your financial needs, priorities and even challenges, we aim to be your trusted adviser, who will advise and inform you of what you need to know, even if the truth might be less pleasant to one’s ear.
Source: Ministry of Finance Singapore
APEX ADVISORY GROUP
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Based on his outstanding performance, Alex has received numerous awards such as the IPP Chairman’s Round Table and the IPP-APEX Top Adviser. He is also consistently ranked as one of the top 10 advisers in IPP since 2014.
Recognised for his leadership skills, Alex is known to be selfless as a mentor to his team and new advisers. Under his tutelage, these advisers too have achieved success within a short timeframe. Described as a kind and passionate leader, Alex is proficient in customising the learning program according to each of his mentee’s personality. By identifying their talents, he guides them patiently on how to utilise their skills to flourish in the industry. With numerous accolades under his belt, Alex’s next goal is to nurture the next generation of leaders in the financial planning industry.