Supplementary Retirement Scheme (SRS)

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Learn how SRS can help you minimize taxes and enhance
your Retirement Nest Egg!

The Supplementary Retirement Scheme (SRS) is a complementary scheme to the CPF and was introduced by the Government on 1st April 2001. The objective of this scheme is to encourage Singaporeans to grow their reserves for retirement.
How the SRS works is simple. Your contributions (subjected to a cap) are eligible for tax relief are tax–deductible and your savings will be accumulated in a tax-free SRS account. So generally, for every dollar contribution to the SRS, your chargeable income will reduce by the same amount. All you have to do is to open an SRS account with any local bank. The money you saved in your SRS account may be immediately channelled into suitable investment tools where all your investment gains will also be
kept in the same tax-free SRS account until your retirement. Upon reaching retirement age*, you can begin to withdraw your savings over a period of ten years. 50% of your savings withdrawn each year will be
subjected to tax. It is possible to enjoy tax savings if you are able to plan your withdrawals effectively.

The subject of taxation planning contains intricate details that are ever-changing. In such cases, one has to keep up with market trends, new age limits, new monetary limit caps and filing requirements regularly.

With our hectic lifestyles, keeping up to date with all these issues can be quite a handful to juggle with. We then tend to fail to fully understand and analyze how we can practise efficient tax planning. Hence, what you might need is a plan that can help to reduce your chargeable income and enhance your retirement nest egg.

Using the SRS also gives you the added advantage of flexibility in choosing from a wide range of investment instruments which you prefer. Be it unit trust, stocks, fixed deposits or a single-premium endowment, depending on which you feel will give you the best returns and suit your needs, you are empowered to make your own choice!

However, a penalty applies if an early withdrawal is made, meaning that if you make withdrawals before the statutory retirement age, the amount withdrawn is subjected to taxes coupled with a 5% penalty. This is to discourage individuals from making withdrawals before retirement.
Approach your financial adviser to understand more about the SRS and how it can fit into your financial plan. Do a simple cost-benefit analysis with him or her and discover how much you can actually save and earn with this scheme. This should be weighed against the opportunity cost of less liquidity.

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