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What is Supplementary Retirement Scheme (SRS)?

SRS is a voluntary scheme to encourage individuals to save for retirement, over and above their CPF savings. Contributions to SRS are eligible for tax relief and only 50% of the withdrawals from SRS are taxable at retirement. By spreading your SRS withdrawals over a period of 10 years, you can minimise or might not even need to pay any tax on your withdrawals. The amount of tax you can save depends on your annual taxable income:

For those new to SRS, it may be a bit hard to grasp. Not to worry, here is a summary with all the important information you need to know.

Penalty for early withdrawal

As its name suggests, SRS is a scheme to encourage saving for retirement. Therefore, for withdrawals made before the statutory retirement age, a 5% penalty based on the amount withdrawn will be imposed. In addition, the full amount withdrawn will be subject to tax. The statutory retirement age is currently being set at 62 years old and is expected to increase to 63 years old in 2022. Your statutory retirement age for penalty-free withdrawal is based on the statutory retirement age prevailing at the time of your first contribution.

Cap on SRS contribution and personal income tax relief

The maximum amount that you can contribute annually to your SRS is capped at $15,300 for Singapore Citizens and Permanent Residents and $35,700 for foreigners. However, do note that there is a total personal income tax relief cap of $80,000 per year. This means that if the total amount of your personal tax reliefs for the year is already more than $80,000 (including CPF relief, parents’ relief, working mother’s child relief), your contribution to SRS will not be eligible for further tax relief.

What should you do with your SRS savings?

SRS is no doubt a useful tool to put aside extra money for your retirement as well as earn tax benefits. However, according to December 2020 data from Ministry of Finance (MOF), 26% of SRS funds stays as cash, a drop of 4% from the year before. It is good news that more people are learning to optimise their SRS savings, as should you.

What Do People Do With Their SRS Funds?

*Source: Ministry of Finance (MOF)

Did you know that monies parked in your SRS account as cash only earns 0.05% p.a. interest? Not only are the returns minimal, your savings may get eroded by inflation. If you’ll like to make your SRS money work harder for you, you can invest your SRS funds in a wide range of financial instruments such as unit trusts, insurance, fixed deposits, stocks, Singapore Saving Bonds and so on. For a novice investor, researching various financial instruments and committing your hard-earned money into investments can be time-consuming and intimidating. If sleepless nights are not what you are after, then these are two options that can help: