The Supplementary Retirement Scheme (SRS) is a voluntary savings plan introduced by the Singapore Government to encourage individuals to save for retirement while enjoying tax relief and tax deferral benefits. Unlike CPF contributions, SRS participation is entirely optional.
When you contribute to your SRS account, the amount reduces your taxable income for the year. Upon retirement, only 50% of your SRS withdrawals are taxable. This tax advantage helps you save more and grow your retirement savings effectively.
Here’s how it works
Singaporeans and PRs can contribute up to S$15,300 per year, while foreigners can contribute up to S$35,700 annually.
Source: IRAS
If you make the maximum SRS contribution of S$15,300, you could enjoy significant tax savings based on current income tax rates. The actual savings depend on your income bracket and other reliefs available.
This figure can reach as high as 71% in tax savings, depending on your circumstances.
Foreigners may even pay no tax at all, depending on their income level and residency status.
Invest your SRS contributions wisely
After you contribute, don’t let your SRS funds sit idle. The interest rate on SRS funds is a modest 0.05% per annum, compared to CPF’s 2.5% to 5% p.a.
To grow your SRS savings, you can invest SRS funds in a range of approved instruments such as:
- Unit trusts
- Stocks and shares
- Bonds
- ETFs
- Fixed deposits
These investment options can potentially help your SRS portfolio earn higher returns over time.
For Singaporeans and PRs:
For foreigners:
Read more: Are You Risk-Averse? Here Are 5 Safer Investment Options
Withdrawing your SRS funds
Ideally, you should withdraw your SRS funds only after reaching the statutory retirement age (currently 63). This allows you to enjoy 50% tax exemption on withdrawals.
At and after retirement age
Once you reach the official retirement age, you can withdraw SRS funds without any penalty. Each withdrawal will have only half of the amount taxed as income.
It’s best to spread your SRS withdrawals over 10 years after retirement. After this period, the remaining balance will be taxed on 50% of the total sum.
To minimise taxes, keep your annual withdrawals below S$20,000 (the minimum taxable income threshold), assuming no other taxable income.
Before retirement age
If you withdraw before retirement, you will face a 5% penalty and 100% taxation of the withdrawn amount, unless it falls under exceptional conditions such as:
- Death
- Medical grounds
- Bankruptcy
- Full withdrawal by a foreigner (subject to IRAS conditions)
Source: IRAS
How do I set up an SRS account?
You can open an SRS account with any of the three authorised banks in Singapore:
Opening an SRS account is simple and can usually be done online via internet banking or by visiting a branch.
You can only have one SRS account at a time. Opening multiple accounts with different banks is an offence.
Benefits of SRS at a glance
- Lowers your taxable income immediately.
- Lets you defer taxes until retirement.
- Encourages long-term saving and investing.
- Offers flexibility with contribution amounts and investment choices.
Frequently asked questions
How does SRS reduce my income tax?
Your SRS contributions are deducted from your assessable income, reducing the amount of income subject to tax. At retirement, only 50% of withdrawals are taxed, offering substantial tax relief.
What are the penalties for early SRS withdrawal?
Withdrawals made before the statutory retirement age incur a 5% penalty and are fully taxable, unless due to death, medical grounds, bankruptcy, or a foreigner’s full withdrawal.
Can I invest my SRS funds?
Yes. You can invest your SRS funds in approved products such as stocks, unit trusts, ETFs, and bonds. Investing your funds can help you achieve higher returns than the default SRS interest rate.
When should I start contributing to SRS?
The earlier you start, the more tax relief and compound growth you enjoy. You can contribute any time during the year before the 31 December cut-off date for that assessment year.
The SRS offers a practical way for Singapore residents and foreigners to enjoy income tax relief while building long-term retirement savings. By contributing regularly and investing your SRS funds wisely, you can reduce your current tax burden and secure a stronger financial future.
Read more: A Comprehensive Guide to the Matched Retirement Savings Scheme
