What is Supplementary Retirement Scheme?
Peter is an expat in Singapore working as a division head of a cyber-security firm, drawing an annual income of $200,000, and considered a tax resident of Singapore. As he is not a Singapore citizen, nor a Singapore Permanent Resident (SPR), he cannot make CPF contributions. Peter is quite upset about it. His HR director mentioned to him that he can make use of Supplementary Retirement Scheme (SRS) as a tax deferment tool for retirement planning purposes, and he wonders how it works.
WHAT IS SRS?
SRS is a voluntary scheme to encourage individuals to save for retirement, over and above their CPF contributions. In Peter’s case, he can enjoy tax deferment on his SRS contributions. Each dollar of SRS contribution will reduce his taxable income by a dollar. The annual SRS contribution cap is currently set at $35,700 for foreigners (the cap is $15,300 for Singapore citizens and permanent residents). If Peter contributes $35,700 to his SRS account, his taxable income will be reduced to $164,300, which means he will enjoy tax savings of $6,750 (based on a tax resident’s tax rate of 18% for income within the $160,000 to $200,000 bracket). Additionally, he can discuss with his employer to have an agreement which allows his company to automatically contribute part of his remuneration/salary to his SRS account on his behalf, and this portion will enjoy the above mentioned tax relief. Now that we have covered the contributions for SRS, let’s discuss the more important area of withdrawal. There are 2 common scenarios for Peter’s case as reflected here on the right side of the column ;
SCENARIO 1: PETER BECOMES A SINGAPORE CITIZEN OR SPR
If Peter plans to retire at age 65, he can enjoy tax concession for his SRS withdrawals over a 10 year period; 50% of his accumulated SRS savings will not be taxed when he withdraws after reaching the statutory retirement age. If he has $400,000 in his SRS account, he can take out $40,000 every year from age 65 to age 74, without having to pay any tax (as the non-taxable income is $20,000), assuming he has no other income at that point in time. This withdrawal will help in boosting his monthly income by $3,333 during this 10 year period.
SCENARIO 2: PETER LEAVES SINGAPORE AFTER 10 YEARS
If Peter decides to return to his country, he does not need to worry that his SRS funds will be locked up; 50% of his accumulated SRS savings will not be taxed and he will not need to pay any penalty on the withdrawal, assuming conditions are met. The SRS can reduce the amount of taxable income and at the same time, help you to set aside money for retirement. Whether you are a Singapore citizen, SPR or foreigner, as long as you derive any form of income in Singapore, SRS could be an important component of your retirement and tax planning. For more information, you can refer to the SRS guide by the Ministry of Finance.
Disclaimer: For Tax advice, please consult your tax accountant or tax lawyer.
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek unbiased financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
Published By:
Sissi Goh Yan Xi
Sissi is a renowned legacy planner based in Singapore, specializing in intergenerational wealth planning and bespoke family office services. Her career spans both New York and Singapore. With extensive experience in hedge fund consulting and private wealth management, she provides professional advice to high-net-worth families.
She graduated from Columbia University in the United States with a Master’s degree in Public Administration, specializing in international finance and economic policy. Her focus is on wealth and family succession planning, and she holds multiple international professional certifications. These include: Chartered Financial Consultant (ChFC), Chartered Life Underwriter (CLU), Trust and Estate Practitioner (TEP), Certified Legacy Planning Advisor (CLPA), Certified High-Net-Worth Client Advisor, Certified Family Office Advisor, and more.
She is an official member of the Society of Trust and Estate Practitioners (STEP), the most reputable global organization in its field; and she is the youngest founding member of the Asia Estate Planning Association (AEPA).
As an award-winning author and TEDx speaker, she wrote the acclaimed book Wealth Management Isn’t Just for the Rich. Her TEDx talk, titled How Not to Lose the Billion Dollars You Didn’t Know You Had, was described by the TED Global Committee as “timely and valuable” and has received 570,000 views. She later published a book with the same title, which received a prestigious award in wealth succession planning. Her financial articles have been selected as training material for financial advisors in Singapore and have been featured on CNA and Money FM, Singapore’s most reputable financial radio stations.
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