Supplementary Retirement Scheme (SRS)
Retirement is one of the biggest goals for a lot of people. When you have been working for decades, it’s easy to forget that retirement can be so much more than a nice place to go when you’re ready to stop working. But what if you were able to retire early? And what if doing so could help you achieve your financial goals? Retirement planning is something a lot of us prioritised in our income-earning years, but as most people at this stage also have more immediate financial goals, retirement planning often gets delayed. That’s where the SRS comes in.
What exactly 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 purely voluntary. SRS accounts receive dollar-for-dollar tax relief up to $15,300 for Singapore citizens/ Permanent Residents (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 investment instruments.
As an incentive, SRS contributions are eligible for tax relief the following year. Thus, if you do contribute to your SRS account by 31 Dec, you can get tax relief in following Year of Assessment.
| Maximum Yearly Contribution | Amount in SGD |
| Singaporean / Singapore PR: | S$15,300 |
| Foreigners: | S$35,700 |
How to open an SRS account?
You can open an SRS account with any of the 3 local banks: DBS, OCBC or UOB. To open an account, you can either show up in person at one of the banks with your NRIC or passport, or apply online.
Regardless of which bank you eventually have chosen, the process for contributing to your SRS account will be similar. While the exact procedure will vary according to the bank you’re using, you should be able to deposit money through internet/mobile banking, at the branch, or by cheque (indicate your SRS number at the back of your cheque).
How much can I save with SRS contribution today?
A simple illustration on how SRS contribution helps at varies annual income tiers.
Based on an annual income of SGD $120,000:
|
Employment Income Less Personal Reliefs (Earned Income, CPF, Qualifying Child, Parent, etc.) |
S$120,000 S$30,000 |
|
| Without SRS Contribution | With SRS Contribution | |
| SRS Contribution | – | S$15,300 |
| Total Relief | S$30,000 | S$45,300 |
| Chargeable Income | S$90,000 | S$74,700 |
| Total Tax Payable | S$4,500 | S$2979 |
| Potential Tax Savings |
S$1,521 |
|
The above table is for illustration purposes only.
Based on an annual income of SGD $240,000:
|
Employment Income Less Personal Reliefs (Earned Income, CPF, Qualifying Child, Parent, etc.) |
S$240,000 S$40,000 |
|
| Without SRS Contribution | With SRS Contribution | |
| SRS Contribution | – | S$15,300 |
| Total Relief | S$40,000 | S$55,300 |
| Chargeable Income | S$200,000 | S$184,700 |
| Total Tax Payable | S$21,150 | S$18,396 |
| Potential Tax Savings |
S$2,754 |
|
The above table is for illustration purposes only.
Based on an annual income of SGD $400,000:
|
Employment Income Less Personal Reliefs (Earned Income, CPF, Qualifying Child, Parent, etc.) |
S$400,000 S$40,000 |
|
| Without SRS Contribution | With SRS Contribution | |
| SRS Contribution | – | S$15,300 |
| Total Relief | S$40,000 | S$55,300 |
| Chargeable Income | S$360,000 | S$344,700 |
| Total Tax Payable | S$53,350 | S$49,984 |
| Potential Tax Savings |
S$3,366 |
|
The above table is for illustration purposes only.
How much can I save as foreigner?
An illustration of how the SRS helps a foreigner save based on an annual income of SGD $200,000:
|
Employment Income Less Personal Reliefs (Earned Income, CPF, Qualifying Child, Parent, etc.) |
S$200,000 S$30,000 |
|
| Without SRS Contribution | With SRS Contribution | |
| SRS Contribution | – | S$35,700 |
| Total Relief | S$30,000 | S$65,700 |
| Chargeable Income | S$170,000 | S$134,300 |
| Total Tax Payable | S$15,750 | S$10,095 |
| Potential Tax Savings |
S$5,655 |
|
The above table is for illustration purposes only.
An illustration of how the SRS helps a foreigner save base on annual income of SGD $400,000:
|
Employment Income Less Personal Reliefs (Earned Income, CPF, Qualifying Child, Parent, etc.) |
S$400,000 S$30,000 |
|
| Without SRS Contribution | With SRS Contribution | |
| SRS Contribution | – | S$35,700 |
| Total Relief | S$30,000 | S$65,700 |
| Chargeable Income | S$370,000 | S$334,300 |
| Total Tax Payable | S$55,550 | S$47,696 |
| Potential Tax Savings |
S$7,854 |
|
The above table is for illustration purposes only.
💡 Note that for each Year of Assessment (YA), a personal income tax relief cap of $80,000 applies to the total amount of all tax reliefs claimed (including relief on SRS contributions).
💡 Do not save what is left after spending, but spend what is left after saving. A penny saved is a penny earned!
For more details of the SRS, please refer to the following link: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Special-tax-schemes/Supplementary-Retirement-Scheme–SRS-/SRS-contributions/
How SRS makes my savings work doubly hard?
1. The main benefit of SRS contribution is tax-relief.
Based on the illustration, as a Singaporean or PR earning an annual income of $120,000, you will be able to save up to $1,521 per year or up to $126 per month in taxes by contributing $15,300 to your SRS account. Every dollar put into the SRS account will enable one to reduce the taxable income by a dollar.
2. SRS funds can be used for further investments.
Who benefits the most from SRS contribution?
The data also revealed that about 25 per cent of SRS account holders in 2021 were between the ages of 18 and 35, up from 19 per cent in 2020. The higher the annual income, the more a person will be able to save in tax when he does SRS contribution.
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.
According to statistics by Ministry of Finance, in fact 24% of the entire SRS investment portfolio is held in cash balance. Investing is a great way to create opportunities for a better future. Given the increased inflation rate, it is important to take advantage of opportunity to grow your funds.
Therefore, while the SRS is a good scheme, it is important that your funds are invested for the opportunity to earn potentially more favourable returns.
Also, for any early withdrawals before the statutory retirement age (63 effective from 1 Jul 2022), all 100% of withdrawal sum will be taxed. In additional, 5% penalty will be applicable on the withdrawal sum as well.
If you have already opened an SRS account and made your first contribution, any subsequent change in the statutory retirement age (e.g. up to age 65) will not affect you.
Source: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Special-tax-schemes/Supplementary-Retirement-Scheme–SRS-/SRS-contributions/
Types of SRS withdrawals
Withdrawals are penalty-free only if they occur on or after the statutory retirement age (63 effective from 1 Jul 2022), which was in effect when you made your first SRS contribution.
You may make penalty-free withdrawals from your SRS account over a 10-year period starting with the first penalty-free withdrawal. In additional, only 50% of each withdrawal is taxable. Therefore, if in a given year you make a $40,000 SRS withdraw, only $20,000 will be subjected to tax. Thus, this remaining $20,000 would be tax-free (if you do not have any other personal income, as shown in the income tax bracket table below.
From YA 2024 onwards
| Chargeable Income | Income Tax Rate(%) | Gross Tax Payable($) |
|
First $20,000 Next $10,000 |
0 2 |
0 200 |
|
First $30,000 Next$10,000 |
– 3.50 |
200 350 |
|
First $40,000 Next$40,000 |
– 7 |
550 2,800 |
|
First $80,000 Next $40,000 |
– 11.5 |
3,350 4,600 |
|
First $120,000 Next $40,000 |
– 15 |
7,950 6,000 |
|
First $160,000 Next $40,000 |
– 18 |
13,950 7,200 |
|
First $200,000 Next $40,000 |
– 19 |
21,150 7,600 |
|
First $240,000 Next $40,000 |
– 19.5 |
28,750 7,800 |
Best strategy for SRS withdrawal
Currently, resident tax rates begin getting taxed after annual income of $20,000. This means that, if you do not have any other taxable personal income, you can withdraw up to $40,000 per year tax-free from your SRS account, for 10 years.
Therefore, is to minimise any income tax during those 10 years by spreading the withdrawals out if you do not have any other income or if you have steady other income, or by withdrawing less in the years when you receive additional income.
💡Idea: The best time to begin your 1st SRS benefit withdrawal is when you are fully retired and no longer receiving any income. This will allow you to enjoy your “tax-free” fruits of your labour.
From YA 2024 onwards
| Type of withdrawal | Amount subject to tax | 5% Penalty Imposed | |
| Penalty-Free withdrawal |
Withdrawal on or after the prescribed retirement age (Withdrawal can be spread over 10 years from the date of the first penalty-free withdrawal) |
50% of the withdrawal sum | No |
| Other Withdrawals | Early withdrawals before the prescribed retirement age | 100% of withdrawal sum | Yes |
Refer to IRAS website for more details on types of withdrawals.
8 ways to use 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 SRS Approved:
• Bonds
• Singapore Government Securities (SGS)/
Singapore Savings Bonds (SSB)
• Fixed Deposits
• Shares
• Single Premium Policies
• Unit Trusts
• Real Estate Investment Trusts (REITs)
• Annuities
We understand everyone have unique financial goals & retirement needs. At IPPFA, our experienced advisers can help you better understand how your SRS monies can be aligned to help you meet your goals.
Also, 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.
Inflation is real, and there will inevitably be speed bumps in the year to come.
As we gear up ahead, let us guide you through & continue to seize these opportunities on current market volatility together! Best of all, your investment gains will not be taxed.
APEX ADVISORY GROUP
Alex Ang
Alex Ang has over a decade of success in financial advisory. Today, he supports an extensive network of long-term clients who appreciate his impeccable service and advice, while leading a team of successful top-tier advisors in IPPFA.
The ChFC® accredited advisor’s comprehensive experience and knowledge enable him to serve a wide demographic of clients – from mass-market, to mass-affluent and high-net-worth individuals. One of the Top 10 advisors in IPPFA since 2014, Alex has won numerous awards; he is a 12-time qualifier of the IPP Chairman’s Round Table (CRT) and is one of IPPFA-APEX Top Advisors.
Alex’s goal is to nurture the next generation of leaders in the financial planning industry. Always willing to share his knowledge and expertise with his team as well as new advisors, he is also known for his outstanding leadership capabilities.
The passionate mentor is adept in identifying talents and guiding them through learning programmes he tailors to their unique personalities. His ability to see the hidden strengths and talents of his mentees, has been key in helping them achieve their fullest potential. Under his tutelage, many of his mentees have achieved successes of their own within short time frames.
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IPP Financial Advisers Pte Ltd
78 Shenton Way #30-01 Singapore 079120
Tel: +65 6511 8888 | enquiry@ippfa.com