Is the Supplementary Retirement Scheme for you?


Saving for retirement is one of the most banal and yet essential things to do in life, especially so when you live in Singapore.  Regardless of how well you’re doing now, you probably still shudder at the thought that one day, you can longer earn an active income.  While the government will probably never adopt a welfare scheme, it does try to help you save up for the eventual and inevitable period of life- old age.

Say hello to the Supplementary Retirement Scheme (SRS) if you haven’t heard of it already.  It’s definitely not for every one, and will only make sense to those who are in a particular phase of life where they can still park aside some money, after financing their regular expenses, investments, and debts.

Here’s what the SRS is and what it’s good for.

What is this scheme and what is it trying to do with my money?

The Supplementary Retirement Scheme is a voluntary scheme to encourage Singaporeans and residents to save for retirement. This is on top of the existing not-very-voluntary CPF savings that every Singaporean is (hopefully) familiar with.

 What’s good about it?

To summarize, the pros about the SRS that are really worth considering are:

i. Eligibility for tax-relief

This is probably the best advantage of opting for the Supplementary Retirement Scheme.  The amount that qualifies for income tax relief is the actual total amount that you contribute to the SRS.

For illustration purposes, assuming one earns an annual income of S$60,000 a year and has no personal tax reliefs, this is how much he/she can save on income taxes with SRS.

retirement table

The maximum amount that you can contribute as a Singaporean or PR is S$15,300 a year, and $35,700 as a foreigner.  How much you’re willing to park aside for the SRS is completely up to you and your financial considerations. But assuming you really have no idea what to do with your cash, don’t want to invest, or don’t need any more investments, then at least you can save on income tax and have your money parked aside for your old age.

ii. Could be used for investments, and returns are tax-free before withdrawal

 Unlike your regular CPF savings, the SRS account earns interest at the market rate i.e. nothing.  Hence, it makes sense that you can use your SRS money for investments.  There are a number of financial products that are available under the scheme. For example:

  • Insurance (Single Premium Plans)
  • Blue Chip Investment Plan
  • Equities
  • Unit Trusts
  • Time Deposits

The best part is that your returns, which are to be deposited to your SRS account, are tax-free.  This gives that little bit more protection to your nest egg.

iii. If withdrawing from retirement age onwards, only 50% of the withdrawals are taxable

When the time finally comes at 62 years of age, you may start to withdraw your hard earned savings. The good news is that only 50% of the withdrawals are taxable.  This means that you can withdraw up to $40,000 a year without paying a single dollar of tax, since the first $20,000 of income is not taxable.

Your SRS savings can be withdrawn over a period of 10 years, and if you have enough parked in there, you could leave your CPF money untouched for more years to accumulate more interest, assuming you don’t have any other financial needs.

Sounds decent. What’s the fine print?

Early withdrawal penalties apply

Think of SRS as the savings account that holds money that you absolutely do not need in the foreseeable and even unforeseeable future.  This is because if you withdraw before the retirement age of 62, then not only will 100% of your withdrawal amount be taxable, you also have to pay a 5% penalty.

There are only a few cases of early withdrawals that deserve the government’s benevolence to spare you of the penalties- death, physical/mental incapacity for employment, and bankruptcy.  Foreigners can also withdraw the amount in full without penalty before the retirement age, provided that they have maintained the account for at least 10 years since the first contribution.

Where do I stash my extra cash?

If you decide that the SRS is a good’ole conservative way to save for your retirement, or you really just want to pay less tax, then open an SRS account with any of these banks and start stashing away.

  • DBS Group Holdings Ltd
  • Overseas-Chinese Banking Corporation (OCBC) Ltd
  • United Overseas Bank (UOB) Ltd

Good luck!


What do you think?