Supplementary Retirement Scheme (SRS) is a program initiated by the Singapore government, which aims at facilitating people to have saving for their future, especially when they are retired. Started in 2001, the program is run by the private sector and completes the Central Provident Fund (CPF), as stated by the Ministry of Finance, Singapore. The main difference is that CPF savings are mandatory, whereas participation in the SRS is voluntary.
Other than preparing for retirement, one main benefit of SRS is tax reduction. Any amounts contributed to SRS are qualified for tax exemption, hence reducing the taxable income to the lower income bracket with lower tax rate. Investments revenues returned to the same SRS account, are tax-free and only 50% of SRS withdrawals are taxable at retirement.
SRS is designed not only for Singapore citizens, but also for Singapore Permanent Residents (SPRs) and foreigners who earn income, as mentioned by Inland Revenue Authority of Singapore (IRAS). Other prerequisites include minimum age of 18 years old, not an undischarged bankrupt, not having a mental disorder, and able to manage themselves and their affairs.
Since 2016, the contribution amount are changed. Singapore citizens are allowed to contribute a maximum of $15,300 in one year, while the maximum annual contribution for foreigners is $35,700. Foreigners should state their status as foreigners by filling up the declaration form for SRS and inform the SRS operator when they change their citizenship into Singapore citizens.
One may apply to open an SRS account at any of the three appointed banks. They are DBS Group Holdings Ltd, Overseas-Chinese Banking Corporation (OCBC) Ltd, and United Overseas Bank (UOB) Ltd. One person is eligible for one SRS account only, but he can move the account from one bank to the another. Contribution can be made via iBanking or at the operators’ branches.
One last thing: the SRS savings is not locked in the account while earning minimal interest. Instead, the fund may be used for financial and retirement planning by investing it in one of the approved insurance and investment products.
Tax reduction and potentially higher savings return are definitely the biggest incentives for participating in the SRS. What are you waiting for? Talk to your financial advisor and find out more today.
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