Already opened and started contributing to your Supplementary Retirement Scheme (SRS) account? The next thing after investing your SRS funds to maximise your returns, is to plan your withdrawal so that you can save more tax.
Read more or about how to maximise your SRS returns here, or read on to know the answers to the most common questions about SRS withdrawal.
When Can I Withdraw My SRS Funds? Can I Withdraw Anytime?
Technically, you can withdraw your SRS funds anytime you want. However, if you’re a Singaporean or PR, you can only withdraw from SRS without incurring any additional penalties after you’ve reached the statutory retirement age (currently at 63 years old).
The statutory retirement is dependent on when you made your first contribution. If your first SRS contribution was made last year (in 2021), you should be able to withdraw your SRS funds without extra penalty when you turn 62 years old. However, if your first SRS contribution is made this year, you can only withdraw your SRS funds without extra penalty when you are 63 years old.
If you choose to withdraw from your SRS account at any time prior to the statutory retirement age, you will have to pay tax for 100% of the withdrawal amount, on top of a 5% penalty fee.
Will I Get Taxed When I Withdraw My SRS Funds After The Statutory Retirement Age?
The good news is if you withdraw your SRS funds after reaching the statutory retirement age, as intended by the government, only 50% of the amount you withdraw will be considered as chargeable income. This 50% tax concession applies for the first 10 years after your first withdrawal when or after you reach the statutory retirement age. In other words, only half of your withdrawal will be taxed.
Learn how to calculate how much tax relief you can enjoy with SRS here when you withdraw your SRS funds strategically.
If you have made investments in the form of life annuities, your income from your annuity streams are exempted from this 10-year period. This means that, as long as you continue to receive income from your annuity stream, only 50% of this income will be taxed.
What if I’m a foreigner? Will I be taxed if I withdraw my SRS funds?
If you’re a foreigner, you’ll have to maintain your SRS funds for at least 10 years from the date of the first contribution, before you can withdraw. Should you decide to withdraw your SRS funds after 10 years, you will have to withdraw in full, where only 50% of your SRS funds will be subjected to tax.
Knowing this, you can start strategising your withdrawal plan so you can fully utilise the tax benefits.
Are There Any Special Conditions Where I Can Withdraw Without 5% Penalty Charges?
Yes. If you:
- declare bankruptcy
- withdraw on medical grounds (physical/mental incapacity, and partial withdrawal for terminal illness)
- withdraw in full for terminal illnesses
In the event of these withdrawals, you can only withdraw in cash, not equities. For withdrawals due to bankruptcy, your withdrawal sum is fully subjected to tax; whereas if you withdraw on medical grounds, only 50% of your withdrawal sum will be subjected to tax. However, if you withdraw in full on grounds of terminal illness, 50% of your withdrawal amount after deducting tax exemption will be subjected to tax.
Scenario 1: Withdrawal on Bankruptcy
For withdrawals due to bankruptcy, your withdrawal sum is fully subjected to tax.
Mr Tan is 55 years old, and has $300,000 savings in his SRS account. In 2021, he declared bankruptcy, and wants to withdraw $200,000 from his SRS funds to pay his debtors. He will have to pay 100% tax on the $200,000 he withdrew.
Amount withdraw: $200,000
Amount subjected to tax: $200,000
Tax payable: $21,150
Scenario 2: Partial Withdrawal on Medical Grounds (e.g., Physical/mental incapacity and partial withdrawal on grounds of terminal illness)
If you withdraw on medical grounds, only 50% of your withdrawal sum will be subjected to tax. Do note that you and your qualified medical practitioner (registered under the Medical Registration Act) are required to complete the Application for Penalty-Free Premature Withdrawal of Funds from SRS Account on Medical Grounds.
Mr Lim is 40 years old, and he has $300,000 savings in his SRS account. In 2021, he was diagnosed with terminal illness, and would like to withdraw $100,000 from his SRS funds. Only 50% of the $100,000 will be subject to tax.
Amount withdrawn: $100,000
Amount subjected to tax: $50,000
Tax payable: $1,250
Scenario 3: Full Withdrawal on Terminal Illness
From Year of Assessment 2016, a tax exemption of up to $400,000 is granted for SRS funds withdrawn in full, on the ground of terminal illness to ensure that SRS members are not unduly disadvantaged due to terminal illness.
Mr Wong is 50 years old, and has $300,000 savings in his SRS account. In 2021, he made his first withdrawal from his SRS funds – a full withdrawal of all the funds (i.e. $300,000), on the grounds that he has a terminal illness. As the amount he is withdrawing is less than the $400,000 that is exempted from tax, the full amount of his withdrawal is not taxable.
Amount withdrawn: $300,000
Amount subjected to tax: $0
Tax payable: $0
*From Year of Assessment 2016, a specified amount of SRS funds withdrawn
in full on the grounds of terminal illness would be exempt from tax.
How Can I Withdraw Without Getting Taxed?
Scenario A:
In an ideal scenario where you have $400,000 in your SRS account and no other taxable income, you can spread your withdrawal of $40,000 over a period of 10 years and pay 0 tax. This is because only 50% of your withdrawn sum is subject to tax, and you will not be taxed for the first $20,000 of your total chargeable annual income.
Withdrawn amount (every year for 10 years): $40,000
Amount taxable after 50% tax concession: $20,000
Tax payable: $0
Scenario B:
You have $500,000 in your SRS account, and have no other taxable income. You can choose to stagger your withdrawal over 15 years, by withdrawing $40,000 each year during the first 10 years, and withdrawing $20,000 from the 11th to 15th year, without incurring any tax.
Withdrawn amount (every year for 10 years): $40,000
Amount taxable after 50% tax concession: $20,000
Tax payable (every year for 10 years): $0
Withdrawn amount (every year on the 11th-15th year): $20,000
Amount taxable (100%): $20,000
Tax Payable: $0
Scenario C:
You have $400,000 in your SRS Funds and no taxable income, but you signed up for a life annuity plan. As mentioned, only 50% of your life annuity income is subject to tax, even after the 10-year period. So you should withdraw $40,000 each year and continue enjoying tax concessions on your annuity streams.
Withdrawn amount (every year for 10 years): $40,000
Amount taxable after 50% tax concession: $20,000
Tax payable: $0
Annuity stream per annum: $40,000
Amount taxable after 50% tax concession: $20,000
Tax payable: $0
With strategic investments and withdrawals, you will be able to maximise your SRS tax savings and returns. Planning for retirement with a SRS account can be overwhelming.
Check out our SRS-approved endowment plans or contact us to learn more on how to maximise your SRS returns today!
This is for general information only and does not constitute financial advice. This advertisement has not been reviewed by the Monetary Authority of Singapore.