Supplementary Retirement Scheme (SRS): What Can You Invest in & Everything You Need to Know
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Supplementary Retirement Scheme (SRS): What Can You Invest in & Everything You Need to Know

Ming Feng
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If there’s anything more complicated than Additional Math…

Quadratic Equation
Like seriously, when has this EVER helped me get a job?!

it’s got to be our Central Provident Fund (CPF).

To further complicate things, there’s also this thing called Supplementary Retirement Scheme or SRS.

But as with all things government-related, it’s damn ‘cheem’ until someone bothers to explain in simple terms. And here at Seedly, that’s what we do best.

What’s the SRS for? And should you even bother opening an SRS account?

Let’s find out.


Should I Open a Supplementary Retirement Scheme (Srs) Account?

If you’re earning more than $40,000 a year, you should seriously consider using the SRS to enjoy tax relief and pay lesser income tax. Even if you’re not earning $40,000 a year, you can open your SRS account and top-up $1 to “lock-in” your retirement age. This strategy is widely used by Singaporeans.

Other than that, you’ll need to invest your SRS funds in order to minimally beat inflation and grow that fund for your retirement.

Ultimate Guide to Supplementary Retirement Scheme (SRS)

Reminder: make your SRS contributions before 31 Dec every year to qualify for tax relief in Year of Assessment.


What Is Supplementary Retirement Scheme (SRS)?

Retirement

The Supplementary Retirement Scheme is a voluntary scheme to help you with your retirement.

Many of you might be thinking, “Retirement? Isn’t that what my CPF savings are for?”

True.

However, the CPF is an involuntary savings scheme that is only meant to give you a very basic retirement income.

You’ll survive…

But if you think that you’ll be feasting on buffets every day in your silver years… you’ve got another think coming.

Plus, most Singaporeans will use their CPF accounts to fund the purchase of their homes.

So banking on your CPF savings as a form of retirement is not the best idea either.

This is where the Supplementary Retirement Scheme (SRS) comes in as you’ll be putting aside funds specifically for your retirement.

Plus, if you contribute to your SRS account by 31 Dec of every year, you’ll qualify for tax relief.

Sounds great right?

WAIT.

You can’t just throw your entire year’s income into the SRS and avoid tax completely because there’s a contribution cap of $15,300 for Singaporeans and PRs.

And if you’re a foreigner, there’s a contribution cap of $35,700.

Oh, and unlike the CPF, you can withdraw your SRS funds anytime you want.

BUT.

If you perform an early withdrawal before the stipulated retirement age, you’ll be subjected to a 5% penalty. And you’ll also be taxed on whatever amount is withdrawn.

See? Not so straightforward right?

Source: giphy

Basically, these measures are put in place to make sure you ACTUALLY put aside the money for your retirement.

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SRS, CPF, Or Savings Account? Which Is Better For My Retirement?

I’m sure some of you are already asking if there’re better alternatives to the SRS when it comes to saving for retirement.

Well… It really depends because there’s no obvious answer.

Here’s an overview of the differences between using your SRS Account, CPF Special Account, or Savings Account to save for your retirement:

 Supplementary Retirement Scheme (SRS)Special Account (CPF SA)Cash (Savings Account)
Interest Rate0.05% p.a (savings)

6-7% p.a (invest)
4-5% p.a0.05 to 2% p.a
Yearly Contribution Cap$15,300 (personal)$7k (personal)

$7k (family member)
-
Tax deductibleYesYesNo
Withdrawal Conditions62 years old (Retirement age)

If before, 5% fee
65 years old (default)

55 years old (if you have enough above basic retirement sum)
Anytime
How To StartOpen with DBS, OCBC, or UOBAutomatically enrolled for Citizens or PRYour savings account

See what I mean?

There’s no clear choice because all three options have their pros and cons.

But let’s focus on the SRS for now.

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So… How Much Can I Save With SRS Tax Reliefs?

Piggy Bank

The biggest advantage of putting money into your SRS account is that you get to enjoy tax breaks.

Other than that, contributions to your SRS account only generate a nominal interest of 0.05% per annum.

That’s similar to the base interest rates you get with most bank savings accounts in Singapore.

And it’s not that great.

FYI: this is unlike funds in our CPF accounts which generate a risk-free interest rate of 2.5% to 5%.

Here’s an idea of how much you can expect to pay in income tax each year:

Annual IncomeIncome Tax RateTax Payable
Up to $20,0000%-
$20,001 to $30,0002%$200
$30,0001 to $40,0003.5%$550
$40,001 to $80,0007%$3,350
$80,001 to $120,00011.5%$7,950
$120,001 to $160,00015%$13,950
$160,001 to $200,00018%$21,150
$200,001 to $240,00019%$28,750
$240,001 to $280,00019.5%$36,550
$280,001 to $320,00020%$44,550
Above $320,00022%> $44,500

You’ll notice that there’s a significant jump once your annual income crosses the $40,000 mark.

So if you’re one of the lucky (or unlucky, depending on your perspective) ones earning more than $40,000 a year, you might want to consider opening an SRS account to enjoy some income tax savings.

Here’s why…

Assuming you’re a Singaporean who’s earning $102,000 a year and can enjoy Personal Tax Reliefs of $31,500 (Earned Income, CPF, Qualifying Child, Parent, etc):

Employment Income$102,000
Less: Personal Reliefs
(Earned Income, CPF, Qualifying Child, Parent etc.)
$31,500
Without SRS Contribution With SRS Contribution
SRS Contribution-$15,300
Total Relief$31,500$46,800
Chargeable Income$70,500$55,200
Total Tax To Pay$2,685$1,614

Maxing out your contribution to your SRS will save you a whopping $1,071!

Note: there is a cap of $80,000 for total personal income tax relief (including SRS contributions)

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How Do I Open An Supplementary Retirement Scheme (SRS) Account?

All ready to open an SRS account? Here’s a step-by-step guide to help you with it.

Identity Card

You need to be:

  • Singaporean, Permanent Resident (PR), or a foreigner
  • at least 18 years old
  • not an undischarged bankrupt
  • mentally sound and capable of managing your money (Fine. this was added by me, but it’s important okay?)

Next, you can open your Supplementary Retirement Scheme account at DBS/POSB, OCBC, or UOB.

You can either apply in person at any of the above-mentioned banks with your NRIC or passport.

Or apply online (much faster):

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What Can I Invest With My Supplementary Retirement Scheme (SRS) Account?

Invest

So you’ve opened your account and made your first contribution…

Sarcastic Man Going "...and?"
Source: giphy

Considering that the interest rate is only a mere 0.05% per annum, you might want to consider investing your SRS funds to make your money go further.

Or at the very least not lose its value due to inflation.

Here’re some government-approved SRS investment options:

SRS-Approved ProductsExampleMinimum Investment
Shares-Depends
Exchanged-traded Funds (ETFs)STI ETF, SPDR Gold SharesDepends
Real Estate Investment Trusts (REITs)-Depends
Bonds-From $5,000
Regular Shares Savings (RSS) PlanOCBC's Blue Chip Investment Plan (BCIP)

POSB Invest-Saver

Phillip Share Builders Plan
From $100 per month
Robo-AdvisorsEndowus, StashawayFrom $10,000 (Endowus)

No Minimum (Stashaway)
Unit TrustsLion-OCBC Global Core Fund

Schroder Asian Income Fund

Fidelity Global Multi-Asset Income Fund
From $100 per month
Single-Premium Insurance Products (recurrent single premium products, both annuity and non-annuity plans)NTUC Income Guaranteed Life Annuity

Manulife Retire-Ready

NTUC Income SAIL

Tokio Marine [email protected]

GREATLife Endowment Insurance 5
Depends
Fixed DepositsOCBC Time DepositFrom $5,000
Singapore Government SecuritiesSingapore Savings Bond (SSB)

SGS Bonds

Treasury Bills
From $500

If you’re interested to find out more about your options, our Seedly Community has shared some interesting insights as to how to maximise your SRS investment options.

Ultimately, one of the best things about investing using your SRS monies is that your investment gains will not be taxed.

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When Can I Make An SRS Withdrawal?

illustration of money transaction

The Supplementary Retirement Scheme is for your retirement, which means that you should make a withdrawal only on or after the statutory retirement age.

FYI: the current statutory retirement age is 62.

That aside, you can also do so on medical grounds or due to bankruptcy.

If you choose to withdraw before retirement age, you’ll have to pay a 5% penalty as well as taxes on 100% of the withdrawn amount.

Well… it’s not called Supplementary RETIREMENT Scheme for nothing.

But if you choose to wait till the retirement age to withdraw your SRS savings, you’ll only be taxed 50% of the withdrawn amount.

Psst! Remember the table above which shows you how much income tax you need to pay a year depending on your annual income?

For an annual income of $20,000, you don’t need to pay taxes.

And since 50% of $40,000 = $20,000

Joey Realises
Source: Friends | giphy

This means that you can make SRS withdrawals of up to $40,000 a year without incurring any taxes!

Mr Krabs I Like Money
Source: SpongeBob SquarePants | giphy

Note: this is all assuming that you don’t have any other sources of income though.

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Not Sure About SRS? You Can Start By Contributing $1 To Your SRS Account Today…

Still not convinced about how the Supplementary Retirement Scheme can help in your retirement planning?

Not earning $40,000 a year yet?

Well… You should still consider opening an SRS account and contributing $1 to it today.

SRS vs CPF SA vs Cash

Especially if you’re worried that the government could potentially increase the statutory retirement age in the future.

To make it even easier for you, we’ve even created a step-by-step guide on how to open your SRS account.

That being said, opening an SRS account might be easy.

But having the discipline to contribute and not perform an early withdrawal is going to be difficult.

Also, the biggest advantage of participating in the Supplementary Retirement Scheme is the fact that you can enjoy tax reliefs.

Other than that, it’s a no-brainer that you’ll need to invest your SRS funds in order to minimally beat inflation and grow that fund for your retirement.

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About Ming Feng
A stint in Bloomberg gifted me with a beer belly, which only grew larger when I moved on to become a Professional Trader. Now I turn caffeine into digestible finance-related content.
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