Supplementary Retirement Scheme (SRS) is part of Singapore government’s effort to address the retirement needs of Singaporeans and is meant to complement Central Provident Fund (CPF).
Over the years, SRS had grown in popularity in Singapore as contributions surged from $0.16billion in 2001 to an explosive $8billion in 2017. During this period, the number of account holders also increased 10 fold, surging from 11,890 to 140,695. Given that so many people had jumped into the bandwagon, it is worthwhile to examine the merits of the supplementary retirement scheme.
While both SRS and CPF are retirement schemes, they work differently and address different financial needs. CPF focuses on housing, healthcare and retirement needs while SRS is a scheme that provides tax relief, investment and saving opportunities.
Generally speaking, SRS is a scheme that Singaporeans and foreigners should consider in the early years of their careers because it comes with many benefits and flexibility. In this article, I will share my strategies and insights on how to leverage SRS to boost your retirement income. I would also highlight the best possible way to exit the fund.
SRS for retrenchment hedge
Firstly, contributions to CPF is mandatory while SRS is purely voluntary. You can choose to contribute to your SRS anytime and as often as you like. For Singaporeans, you may choose to contribute up to $15,300 to your SRS account while the maximum limit for foreigners is $35,700. In addition, contributions to SRS qualify you for dollar-for-dollar tax relief. But note that there is a $80,000 personal income tax relief. So if the total personal income tax relief have already exceeded this cap limit, your contributions would not entitle you to more tax relief.
Unlike CPF, one of the best things about SRS is its flexibility. You can only withdraw from your CPF account at the age of 55. If you are retrenched before 55 and have no income for months or years, you still cannot withdraw from your CPF. You are only eligible to withdraw your CPF monies (before 55) if you are dead, terminally ill, mentally incapacitated or decided to leave Singapore permanently.
On the other hand, there is no restrictions on the eligibility for SRS withdrawals. You can choose to withdraw your SRS savings anytime you wish, subject to the 5% penalty. If you withdrew your SRS savings before the statutory retirement age, 100% of the withdrawal will also be subject to tax. So if you had been retrenched for some time and had no income for the whole of that year, you may consider to [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
In a bid to raise financial literacy and reward SG Wealth Builder members, I am pleased to launch the Best SGX stock research campaign. Winner of this contest gets to receive cash prize of $1000!
The rationale for launching this activity is to level the playing field for retail investors, who often lack access to quality SGX stock research, especially homegrown SME stocks. Through this SGX stock research campaign, I hope to raise interest in SGX stocks among local investors, and at the same time, encourage members to share ideas and showcase their analytic skills. The winning entry will be published in this blog for learning purposes.
The winning SGX stock research article must cover a stock that is listed in Singapore Exchange (SGX) and should be engaging and interesting to read. From a story-telling perspective, you can share your best or worst SGX stock investments and what valuable lessons that can be gleaned. Ideally, the article should also contain data to back up the thesis and provides insightful analysis.
Winning prize: $1000
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