Supplementary Retirement Scheme Singapore | SRS Guide Singapore

by Priyadarshini 18 January 2022

The SRS is a government program designed to assist Singaporeans in planning for retirement. However, as with other government-created programs, it may not be fit for everyone and might be rather limiting. Here’s all you need to know about the program and how to join. In this blog, we tell you about Supplementary Retirement Scheme Singapore.

What exactly is the Supplementary Retirement Scheme (SRS)?

The Supplementary Retirement Scheme (SRS) is a voluntary savings plan designed to help you prepare for retirement. But, wait a minute, don’t we already have CPF? CPF, on the other hand, is an involuntary savings system that is only intended to provide you with a very minimal retirement income, which may not be sufficient for more expensive lifestyles. Furthermore, because many people are depleting their CPF savings to buy homes, some Singaporeans may be unable to rely on CPF to pay for their retirement.

This is where the SRS (Supplemental Retirement Scheme Singapore) enters the picture. In its most basic form, it is a savings account where you can deposit your retirement funds. SRS payments are eligible for tax refund the next year as an incentive. So, if you contribute to your SRS account before December 31, 2022, you will be eligible for tax savings in the fiscal year 2022. (which is filed in 2023).

However, you cannot donate your full income and avoid paying taxes because Singaporeans and PRs have a contribution maximum of $15,300. In contrast to CPF, you can withdraw funds from your SRS account whenever you wish. This, however, is not without costs. Early withdrawal (i.e. before the retirement age) incurs a 5% penalty, and any money removed before the retirement age is taxed.

How much money can you save using SRS tax breaks?

The primary benefit of contributing to your Supplementary Retirement Scheme (SRS) is the tax benefits. Aside from the tax savings, the SRS account does nothing remarkable with your money. As a result, there are few advantages to investing the money or putting it in high-interest savings account if left alone. If you do engage in the SRS, it should be to reduce your tax liabilities. Savings might be substantial for those earning more than $40,000 per year.

Can you utilize your funds to invest in SRS?

Yes. You can and should because depositing money in a Supplementary Retirement Scheme (SRS) account and doing nothing makes no sense. Rather than letting the cash in your account rot and lose value due to inflation, you can invest in those SRS funds. The best part is that your investment gains will not be taxed.

The only factor is that you can only invest your SRS funds in methods that have been allowed by the government, such as:

  • Index funds for unit trusts
  • Blue-chip stocks
  • Plans for endowment insurance
  • Fixed deposits in Singapore Dollars
  • Savings Bonds in Singapore.

The bank where you started your SRS account can advise you on how to invest your SRS funds.

When is it possible to make an SRS withdrawal?

Singaporeans with a Supplementary Retirement Scheme (SRS) account can withdraw funds at any time before or after reaching the statutory retirement age of 62. (currently). You can also do so for medical reasons (for example, if you require money for an operation) or because you are bankrupt. If you withdraw before retirement age and are not doing so for medical or bankruptcy reasons, you will be subject to a 5% penalty as well as taxes on the entire amount withdrawn. When determining your income tax liabilities for the year, the withdrawn amount will be added to your taxable income.

It may appear harsh, but this is the Supplementary Retirement Scheme Singapore, and it is meant for after your retirement.

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Supplementary Retirement Scheme Singapore
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