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Is Your SRS Working for You – or Against You?

The Supplementary Retirement Scheme (SRS) is a valuable tool for boosting retirement savings in Singapore. However, many individuals leave their SRS funds sitting idle, earning a mere 0.05% interest per annum. With inflation eroding purchasing power over time, uninvested SRS funds may lose value rather than grow. Understanding how to maximize your SRS savings through strategic contributions and investments is key to securing a comfortable retirement.

 

Understanding the Supplementary Retirement Scheme (SRS)

The SRS is a voluntary savings scheme designed to supplement CPF savings for retirement. Unlike CPF, which has mandatory contributions, individuals can contribute varying amounts to their SRS accounts (subject to an annual cap) at their discretion. These funds can then be invested in a wide range of SRS-approved instruments to generate higher returns.

Part 1: Tax Benefits of SRS

One of the most attractive aspects of the SRS is its tax benefits. There are three key advantages:

  1. Tax Relief on Contributions – Every dollar contributed to SRS reduces your taxable income, lowering your overall tax burden. For high-income earners, this can translate into significant tax savings. For example, an individual earning $100,000 who contributes $15,300 (the maximum for Singaporeans and PRs) can lower their taxable income to $84,700, reducing their tax payable.
  2. Tax-Free Investment Growth – Investment returns generated within the SRS account are not taxed. This allows your savings to compound over time without reducing your returns.
  3. 50% Taxable Withdrawals at Retirement – Upon retirement, only 50% of SRS withdrawals are taxable. If managed properly, retirees can stagger withdrawals to stay within lower tax brackets, reducing the overall tax burden.

 

Is Your SRS Working for You - or Against You? — Engage

Table is for illustration purpose only.

 

Part 2: Retirement Savings and the Cost of Keeping SRS Funds Idle

While the tax benefits are compelling, leaving your SRS funds in the account without investing could mean losing out on potential growth. The default interest rate of 0.05% per annum is significantly lower than inflation. Over time, this erodes the purchasing power of your savings.

Instead of letting your SRS funds sit idle, you can invest in various SRS-approved instruments, such as:

  • Bonds
  • Singapore Government Securities (SGS) / Singapore Savings Bonds (SSB)
  • Fixed Deposits
  • Shares
  • Unit Trusts
  • Fixed Deposits
  • Savings Policies / Annuities

 

Here’s an example of how investment returns can help you to grow your SRS money:

Frank contributes $15,300 annually to his SRS accounts, totalling $459,000 in his account after 30 years of annual contribution.

Scenario 1: Frank is content to let his funds lie un-invested, earning an interest of 0.05% per annum (SRS deposit rate).

Scenario 2: Frank invests in a SRS-approved instrument that earns him a return of 3% per annum.

Scenario 3: Frank is slightly more aggressive and invests in a SRS-approved instrument that earns him a return of 5% per annum.

Is Your SRS Working for You - or Against You? — Engage

 

Take Action to Maximize Your SRS

The SRS is a powerful tool, but only if used effectively. Simply contributing isn’t enough—investing your SRS funds wisely is crucial to beating inflation and growing your retirement nest egg.

Let’s discuss how you can make the most of your SRS savings. Reach out today for a consultation and take control of your financial future!

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 independent 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:

Tan Ri'an 陈日安

Meet Ri’an, an esteemed independent financial adviser representative with a decade-long experience in financial and estate planning. His steadfast commitment to prioritising his clients’ well-being and consistently acting in their best interests, sets him apart from the rest. The inherent values of partnership and accountability are firmly rooted in Ri’an’s practice.

Ri’an’s approach is all about understanding each client’s unique aspirations and circumstances before guiding them step by step with a personalised action plan that lead to achieving their financial goals. He is able to simplify difficult-to-understand processes, or policies and highlight the essentials, thus empowering clients to make well-informed choices and be at ease with every decision.

Approachable and enthusiastic, Ri’an finds joy in providing assistance. If you’re ready to work with a financial planning professional who not only understands your financial goals but actively works to achieve them, connect with Ri’an today.

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In compliance with the Personal Data Protection Act, Financial Alliance Pte Ltd (“FAPL”) seek your consent to collect and use your personal data (e.g. name, NRIC, contact numbers, mailing addresses, email addresses and photograph) for the purposes of and in accordance with FAPL’s Data Protection Policy, which can be found on FAPL’s website at https://fa.com.sg/data-protection-policy/.

根据《个人数据保护法》，鑫盟理财私人有限公司征求您的同意向您收集并使用您的个人信息。鑫盟理财将根据公司的个人数据保护政策所阐述的用途使用您的个人资料（例如姓名，证件号码，联系电话，邮寄地址，电邮地址和照片）。 该政策可在本公司网站上查寻，网址为 https://fa.com.sg/data-protection-policy/.

By submitting this form, you are deemed to have read and understood FAPL’s Personal Data Policy.

提交此表格，即表示您已阅读并理解鑫盟理财私人有限公司的个人数据政策