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What is SRS?

Supplementary Retirement Scheme (SRS) is a voluntary savings programme, initiated by the government to supplement Central Provident Fund (CPF) and encourage Singaporeans to save more for their retirement. The difference between SRS and CPF is that SRS is entirely voluntary, and you can withdraw your money from SRS in the event of an emergency, subject to tax. 

Individuals can only make cash contributions to their SRS accounts. However, these contributions can only be used as tax relief to a certain limit. To grow your money faster, your SRS contributions can be used to invest in SRS-approved investment vehicles. There is also no fixed contribution rate because it is entirely optional, so you can contribute any amount, any time, and any number of times you choose.  

Benefits of SRS:

1. Tax Benefits

As mentioned above, you can enjoy tax benefits when you contribute to your SRS accounts. Singaporeans or PRs can deduct up to $15,300 from their chargeable income for each financial year, from their SRS contributions. Meanwhile, foreigners are allowed to deduct up to $35,700 every year from their SRS contributions to reduce your chargeable income. 

If you do the maths, $15,300 can potentially save you up to hundreds and thousands worth of tax. This is especially true after your chargeable income is more than $40,000, because there will be a significant jump in payable tax. Considering this tax advantage, you should contribute as much as possible to your SRS accounts. Do note that you should make sure you have enough savings and emergency funds, prior to maxing out your SRS contributions, as early withdrawals made before the statutory retirement age, will result in a 100% tax, as well as a 5% penalty cost. In other words, you should think of your SRS funds as being untouchable until you retire.

Read more on How to use SRS for tax relief?

2. Invest and Earn Tax-Free

Your SRS contributions only provide a meagre 0.05% annual return. That’s why you shouldn’t leave your SRS funds in your account as it is. Your retirement fund can hardly grow with a 0.05% annual return, let alone serve as an inflation hedge. Over time, your money will lose value. Instead, you should take advantage of the tax-free returns when you invest with SRS, and strive to at least provide a return higher than the inflation rate of approximately 2%, to grow your nest egg. 

If you are risk-averse, you can consider SRS-approved endowment plans, Fixed Deposits or Singapore Saving Bonds (SSB), where both your capital and interest are typically guaranteed. However, if you are a risk-taker who is willing to take more risks for higher returns, you can consider Unit Trusts, Blue Chip Stocks or REITs to finance your ideal lifestyle.

See the Comparison of Every SRS Investment Option You Can Consider here.

Not sure what to invest your SRS funds in? Don’t worry, our experienced consultants can help you find the right investment to get you your desired results. Contact us or Whatsapp us at +65 9151 5963 (Mon to Fri: 9am – 5pm) to find out more.

Why Should You Contribute $1 to SRS Now?

After reading about the above benefits, it’s important that you open an account and contribute $1 today, if you don’t already have an SRS account. 

This is because Singpaoreans and PRs are only permitted to withdraw from their SRS funds when they reach the statutory retirement age, which is currently 63 years old. While you may not be anywhere near your 60s or retirement, the year you make your first contribution to your SRS accounts will influence the age at which you can withdraw your SRS funds without incurring penalties. 

For instance, if you made your first contribution last year (2021), you would have been able to withdraw your SRS funds when you’re 62 years old, as the statutory retirement age increased a year older this year (2022). The Singaporean government is also planning to continue increasing the statutory age to 65 years old by 2030. Therefore, keep in mind to make your first contribution today, if you want to withdraw your SRS funds as soon as possible; you’re not getting any younger. Even if you don’t earn more than $40,000 to contribute extra to your SRS account, you should still open an account and deposit $1 today (SRS does not have a minimum contribution), so you can withdraw your future contributions without penalty at 63 years old. 

How To Open an SRS Account?

1. Who can open a SRS account?

You can open a SRS account if you are a:

  • Singaporean Citizen
  • Singaporean Permanent Resident (PR)
  • Foreigner who works in Singapore

However, you cannot open an account if you are:

  • Below 18 years old
  • An undischarged bankrupt
  • Suffering from a mental disorder

2. How to open a SRS account?

SRS accounts are managed by 3 local bank operators:
I. DBS Group Holdings Ltd
II. Overseas-Chinese Banking Corporation (OCBC) Ltd
III. United Overseas Bank (UOB) Ltd

You can either open a SRS account online or open it in person at a bank. To successfully open a SRS account at one of these banks, you’ll need to bring your NRIC or passport, and a completed declaration form for SRS if you’re a foreigner.

Do note that you won’t be allowed to open a new account if you previously had a SRS account, which was closed after withdrawing all the money due to reaching the retirement age, or medical reasons.

3. How to know If I’m qualified for tax relief for SRS?

You’re qualified for SRS tax relief in the year of assessment of the following year of contribution. This is only if you are still a tax resident of Singapore in the following year. Do check with your SRS bank operator to confirm the cut-off date for SRS contributions.

However, you’ll not be granted tax relief if your SRS account is suspended at the 31st December of the year of contribution, or if the amount you contributed is withdrawn from your SRS account in the same year.

Have more questions or need more help? Reach out to our consultants who are happy to tell you how to maximise your SRS funds, maximise your tax benefits and grow your nest egg.

This is for general information only and does not constitute financial advice. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Posted in Life & Health, Retirement, Savings