Supplementary Retirement Scheme (SRS)
The rich and the wealthy have ways to pay as little income tax as possible, be it hiring a tax accountant, asset based lending, etc. But what about the average people?
Is there a way to pay less taxes and grow your wealth simultaneously? Maybe there’s a way to achieve that. The Singapore government has a scheme called SRS.
- SRS, also known as supplementary retirement scheme and is part of the Singapore’s government’s multi-pronged strategy to address financial needs of greying population by helping Singaporeans to save for their old age. SRS is a retirement savings bank account which you can voluntarily open at DBS/POSB, OCBC, and
- The SRS complements the Central Provident Fund (CPF). CPF savings are meant to provide for housing and medical needs and for basic living needs after retirement. Unlike the CPF scheme, participation in SRS is voluntary. SRS members can contribute a varying amount to SRS (subject to a cap) at their own discretion. The contributions may be used to purchase various investment
- SRS contributions are eligible for tax relief the following So, if you contribute to your SRS account by 31 Dec 2022, you can get tax relief in year of Assessment 2022 (which is filed by IRAS and paid by you in 2023). You get a dollar-for-dollar tax relief on your SRS contributions, which reduces your chargeable income.
- Singaporeans and PRs can only contribute a max of $15,300 into the SRS bank account every For foreigners, the maximum yearly contribution is $35,700.
- Unlike CPF which only allows you to deposit and not withdraw funds, you can withdraw your SRS account’s funds whenever you want (you’ll be taxed on the withdrawn amount). However, this is not without negative consequences. Early withdrawal (i.e. before the retirement age) subjects you to a 5% penalty, and you’ll also be taxed on any amounts withdrawn before retirement age of It is discouraged to withdraw the funds before retirement age unless it’s for emergencies.
- The mechanics of SRS
Resident Tax Rates from Year 2024 onwards
| Chargeable Income | Income Tax Rate (%) | Gross Tax Payable ($) |
|---|---|---|
| First $20,000 Next $10,000 |
0 2 |
0 200 |
| First $30,000 Next $10,000 |
– 3.50 |
200 350 |
| First $40,000 Next $40,000 |
– 7 |
550 2,800 |
| First $80,000 Next $40,000 |
– 11.5 |
3,350 4,600 |
| First $120,000 Next $40,000 |
– 15 |
7,950 6,000 |
| First $160,000 Next $40,000 |
– 18 |
13,950 7,200 |
| First $200,000 Next $40,000 |
– 19 |
21,150 7,600 |
| First $240,000 Next $40,000 |
– 19.5 |
28,750 7,800 |
| First $280,000 Next $40,000 |
– 20 |
36,550 8,000 |
| First $320,000 Next $180,000 |
– 22 |
44,550 39,600 |
| First $500,000 Next $500,000 |
– 23 |
84,150 115,000 |
| First $1,000,000 In excess of $1,000,000 |
– 24 |
199,150 |
Example:
If you are a Singaporean who is earning an annual income of $120,000 a year, you would have to pay about $7,950 in income tax. However, if you choose to contribute $15,000 into the SRS account for that year, you would have lowered your chargeable income by $15,000 to $105,000.
Hence you would only need to pay $6,225 in income tax [3,350 + (25,000 * 0.115)]. From $7,950 to $6,225, that is $1,725 in tax savings, which is roughly 28% lower than what you used to pay.
OUR RECOMMENDATIONS
There are several ways to utilize the money in the SRS account which ultimately benefits the individual for retirement.
The funds in the SRS account can be invested in the following;
- Insurance Products
- Unit Trusts
- Index Funds
- Blue Chip Shares
- SGD Fixed Deposits
- Singapore Savings Bonds
Below are some SRS eligible solutions that we would recommend:
Endowment Plans
- AIA – Smart Wealth Builder (II)
- Income – Gro Saver Flex Pro
- Income – Gro Retire Flex Pro
Investment-Linked Plans
- HSBC Life – Wealth Invest
- Income – WealthLink
- Tokio Marine – #goElite / #goElite Secure
- Tokio Marine – TM Wealth Aspire
Unit Trusts
- Allianz Global Investors Fund – Allianz Best Styles Global Equity Fund – Class ET (H2- SGD) Acc
- Eastspring Investments Unit Trusts – Pan European SGD
- Manulife Asia Pacific Investment Grade Bond Fund A SGD
To conclude, SRS allows you to have tax relief as well as money for retirement. Be reminded that you must invest the money in the SRS account otherwise, inflation will erode the value with time.
Please contact your trusted PromiseLand Financial Adviser Representative for more information on the products mentioned above if you are interested. Alternatively, you can send us an enquiry and we will get in touch with you shortly.
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