Guide To Supplementary Retirement Scheme (SRS) Account In Singapore (2024)

Whether you just graduated, you’re on your first job, or you’re already starting a family, saving for retirement can be an intimidating task. While you may already have your Central Provident Fund or CPF savings, it may not be enough to live a comfortable life.

While CPF is compulsory to help make your retirement planning easier, you can maximise your earning potential today and become more proactive so you can save more money for your golden days. This can be done with the voluntary Supplementary Retirement Scheme (SRS) account.

• What is SRS Account?
• How SRS Works
• SRS Contribution and Tax Relief
• How to Open an SRS Account?
• How to Top-Up SRS Account?
• When to Make SRS Withdrawal
• Benefits of Contributing to SRS
• Disadvantages of Contributing to SRS
• FAQs on SRS

Supplementary Retirement Scheme or SRS account is a voluntary scheme that was introduced by the government to enable Singaporeans to save more for retirement.

But is this really needed?

While CPF is already present to help people plan their retirement, keep in mind that CPF is only meant to help people cover their basic retirement needs. This may not be enough for people who want to live a more luxurious lifestyle in the future.

Moreover, many Singaporeans and PRs are also using their CPF accounts to cover big-ticket purchases such as homes, so it may not be reliable to fund their entire retirement life.

This is why you need to open a Supplementary Retirement Scheme account. This is designed to complement CPF for people who want to prepare for expenses when they get older.

To participate in this scheme, you must open an SRS account, which is a holding place where you can put your retirement savings.

The Supplementary Retirement Scheme doesn’t require a fixed contribution rate so you can contribute as little or as much as you want. This account is specifically designed to help people increase their retirement funds through safe investments such as endowment plans, bonds, and stocks (more on this later). All gains earned on investments are also tax-free before withdrawal, and upon retirement, only 50% of withdrawals are taxable.

When you make contributions, you can benefit from SRS tax relief for the following year, although it is subject to limitations.

One of the reasons why a lot of people want to have an SRS is because it allows them to save on income tax. This is possible for Singaporeans, Permanent Residents, and even foreigners. The maximum amount to be contributed each year to SRS is S$15,300 for Singaporeans and PRs. For foreigners, the maximum contribution is S$35,700.

Every dollar in your SRS account is tax-deductible, up to the given contribution cap. There’s no need to show your tax return to enjoy tax relief from your SRS. The bank where you opened an SRS account will directly report it to the government, and your tax relief will be automatically deducted. This is extremely beneficial for people who want to reduce their chargeable income without much effort. How much you have to pay in taxes annually depends on what income bracket you belong to.

Take a look at this table for more details.

Note: these tables are only from 2017 to 2023. Check this page for YA 2024 onwards.

To be eligible to sign up for an SRS account, you must be at least 18 years old if you are a Singaporean, PR, or foreigner. You must also not be an undischarged bankrupt and have no pending or existing SRS account or account application with these banks.

If you are eligible, you can open a DBS SRS account, OCBC SRS account, or UOB SRS account. Check the links provided to determine which SRS account is better for your needs. There are no current SRS account promotions as of press time.

Contributing to your SRS account in Singapore is the same as depositing money to any bank account. Although the procedure varies depending on which bank you are using, it is possible to do it through mobile or internet banking, at a physical branch, or by cheque as long as you indicate your SRS number at the back.

It is also possible to contribute to your SRS fund through your employer. However, SRS contributions should be strictly made in cash, and it is not allowed to use your CPF to top up an SRS account.

You can make SRS contributions to top up your account as many times as you like but keep the maximum amount in mind.

Before you know the different SRS investment options, keep in mind that investors are recommended to have a long-term approach when it comes to SRS, especially because this investment is geared toward retirement.

Moreover, there is a trade-off when it comes to liquidity. Therefore, you need to ensure that you don’t need access to the money you committed in your SRS fund. Before committing to an SRS top-up, look at your potential medium and long-term large purchases such as a new home, car, or other properties. You must also diversify your portfolio to avoid risks.

With your SRS account, you have more investment options compared to your CPF. There are tons of investment alternatives, but here are the most popular ones.

You can use your SRS fund to purchase different endowment insurance plans which allow your savings to grow while providing you with much-needed insurance against total permanent disability or death during the policy’s duration. There are also other insurance plans you can purchase such as for long-term care, or critical illness.

Because of the SRS withdrawal nature (more on this later), it makes sense to grow them through a medium-term endowment insurance plan to multiply your returns and ensure you meet your goals during your golden years.

Your SRS funds can also be used for Unit Trusts. Banks usually follow a very rigorous screening process to determine their recommended fund ideas for investors like you. Index funds are not only affordable, but also easy to invest in. Most banks allow SRS account holders to start with as little as S$1,000 for this investment or do a monthly staggered investment.

Think of investing in an ETF similar to investing in multiple things at once. When you invest in a basket of multiple goods that can include stocks, shares, bonds, or a mixture of both plus other commodities, you can benefit from a diversified investment portfolio. This will eliminate the risk of investing in a single bad investment avenue.

If you are interested in purchasing securities that are part of the Singapore Stock Exchange, you can do this. Blue Chips are stocks released by successful companies that boast a proven track record over the years. Through this investment, you can enjoy dividend payments even during economic downturns.

Most banks offer a structured deposit scheme, which is a combination of an investment product and a deposit. This is dependent on the performance of certain financial instruments, and your principal amount will be returned to you if you hold on to it until it matures. This is a great option for people who want to get higher returns, although the payout differs per investment.

You can also place your SRS fund on time deposits. This option is designed for those who want the security of a higher return through a fixed tenure.

Because the land in Singapore is limited, it comes as no surprise that REITs are in demand. This is what makes REITs a worthwhile investment avenue. With this investment, you can own a share in properties such as shopping malls, hospitals, and office buildings, and earn regular dividends.

Your SRS fund can also be used to buy Singapore Government Securities, which are debt instruments that are backed by the Singapore Government. This is a great way to diversify your portfolio through SGS bonds and SGS Treasury bills.

If you plan to open an SRS account, you can withdraw from it before and after your prescribed retirement age.

If you have an intention to withdraw your funds before you turn 62 years old, contributing to SRS may not make sense. Keep in mind that early SRS withdrawals are 100% taxable. Moreover, there is a 5% penalty imposed on your withdrawal amount. Therefore, you won’t feel the tax benefits that you gained. That said, it is still an option if you need the money.

Meanwhile, withdrawing your SRS after your prescribed retirement age is a great idea. Your withdrawals will only be 50% taxable, and there will also be no penalties. While you may still receive tax benefits while you are young, you still have to pay taxes when you withdraw them during your golden years. However, don’t worry because you’ll still end up paying lower taxes.

When it comes to withdrawing your SRS savings, it can be done through lump sum or regular withdrawals. Because of the 50% tax, drawing out all your SRS savings at one time is not recommended if you want to avoid a huge amount of taxes in one go.

To paint a clearer picture, imagine you have a lump sum of S$400,000. Take a look at this table below to find out how much taxes you need to pay if you plan to withdraw it before your prescribed retirement age.

The government allows SRS account holders to withdraw their savings over a period of 10 years, which starts from the 1st withdrawal made after the prescribed retirement age.

If you plan to withdraw after your retirement age, here is an illustration at how your SRS savings withdrawal will work.

With this setup, you can save so much money because no tax shall be taken for the first S$20,000 of your income. After 10 years, you can withdraw up to S$400,000 tax-free.

Here are the reasons why you should consider contributing to SRS.

Contributing to SRS will boost your retirement funds. Even if you contribute only a small portion of your salary to SRS, it will still provide you with a sufficient amount for your golden years.

Furthermore, you can also withdraw from it even if you are not at the prescribed retirement age yet, although this comes with penalties.

Probably the main reason people open an SRS account is to enjoy tax savings. This is because SRS is designed to help you save while incentivising you to enjoy tax savings. If you have a large income, this can be greatly beneficial.

Although SRS is a great investment vehicle, it is not ideal for everyone. Here are the disadvantages of contributing to SRS.

Currently, most banks only offer an SRS interest rate of only 0.05% per annum, which is not competitive with other investments.

If you are just starting to earn money, you might need your hard-earned money to pay off debts or important items you need.

Money in SRS can only be invested in certain products. If you want to invest outside this category, it is not possible.

If you contribute to SRS, your money will not be locked up technically, but because of the penalties involved, it won’t make sense to withdraw it before turning 62 years old. If you decide to withdraw your funds before then, you will be met with a 5% penalty and 100% tax on your withdrawals.

Here are some questions you may still have about SRS.

Opening an SRS Singapore account is one of the best things you can do for your future self. While the interest rates are quite low, doing this will help you enjoy tax savings while you are young. This opens opportunities for you to enjoy greater financial freedom in your golden years.

Now that you know what you need to do to get started, go ahead, and open an SRS account. Set a goal and make sure you will find a way to achieve it. It’s never too late to start saving for supplementary retirement funds, so go ahead and make your SRS contribution a part of your daily budget.