All about SRS

As part of a tax relief and retirement building hack, I’m sure you heard about the Supplementary Retirement Scheme (SRS).

It’s #1 on my 3 things to do before every year end!

1. Contribute up to $15,300 to Supplementary Retirement Scheme (SRS) account, eligible for tax relief.
2. Contribute up to $8,000 to your own Special Account (SA)/ Retirement Account (RA), eligible for tax relief
3. Contribute up to $8,000 to your parents/ parents-in-law / grandparents / grandparents-in-law and qualifying spouse and siblings, eligible for tax relief

Why SRS?

1. SRS savings can be withdrawn before the statutory retirement age unlike CPF SA or RA. SRS withdrawal statutory retirement age is dependent on the prevailing retirement age when you made your first contribution. Early withdrawals are fully taxable and incur a 5% penalty.
   • Given my first SRS contribution was in 2012, I can start withdrawing at age 62 without penalty. Back in 2012, the statutory retirement age was 62.
   • If you need money urgently, you still can withdraw it subject to taxes and a 5% penalty.
   • The withdrawn amount is included in your taxable income, based on information provided by your SRS bank. It will be taxed based on the prevailing tax rate. You must also pay a 5% early withdrawal penalty.
2. Exceptional grounds for early withdrawal:
   • Medical grounds: If you are physically or mentally incapacitated and not able to continue in any employment, you may withdraw your SRS. 50% of the amount withdrawn is subject to tax. You and your qualified medical practitioner currently registered under the Medical Registration Act are required to complete the Application for Penalty-Free Premature Withdrawal of Funds from SRS Account on Medical Grounds (DOC, 87KB).
   • Terminal illness and Death: You may make a full withdrawal, with 50% of the amount subject to tax. From YA 2016, a tax exemption of up to $400,000 would be granted for SRS funds withdrawn in full on the grounds of terminal illness or deemed withdrawn upon an SRS member’s demise. The penalty for early withdrawal does not apply.
   • Bankruptcy: You may apply to withdraw your SRS savings on grounds of bankruptcy if you are bankrupt. 100% of the amount withdrawn is subject to tax. The penalty for early withdrawal does not apply. The SRS bank needs to submit the Application for Penalty-Free Premature Withdrawal of Funds from SRS Account upon Bankruptcy (PDF, 122KB).
   • Full withdrawal of the SRS balance by a foreigner:
     • Are neither a Singaporean nor a PR on the date of withdrawal and for 10 continuous years before the date of withdrawal; and
     • Have maintained your SRS account for at least 10 years from the date of your first SRS contribution; and
     • Make a one-time full withdrawal from your SRS account. 
     • You may apply to withdraw your SRS savings without penalty and have 50% of the amount fully withdrawn subject to tax.
3. SRS was designed as an investment account for retirement, with very low interest rates of 0.05%.
   • Investment returns are tax-free before withdrawal
   • At or after retirement age prevailing at the time of your first contribution: Withdrawals enjoy a 50% tax concession. You can spread withdrawals over 10 years to manage your tax bill.
   • Withdrawals from SRS accounts are subject to tax in the Year of Assessment (YA) following the year of withdrawal. 
   • Find out more on Tax on SRS withdrawals.

How to get started?

• You can only open 1 SRS account at anytime with any of the 3 local banks:
  • DBS Group Holdings Ltd
  • Overseas-Chinese Banking Corporation (OCBC) Ltd
  • United Overseas Bank (UOB) Ltd

What can I invest my funds in?

You can grow your savings by investing in a range of investment instruments, including:

• Shares, unit trusts, bonds, fixed deposits
• Certain life insurance products (subject to limits)
• Exchange Traded Funds (ETFs)

Note: Direct property investments are not allowed.