What Is SRS Singapore? You got to know this..
SRS Singapore is referring to the voluntary Supplementary Retirement Scheme which enables Singaporeans or Singapore Permanent Residents to contribute any amount up to S$15,300 annually to their SRS account for investments and tax saving purposes. For foreigners, they can also contribute any amount up to S$35,700 annually to their accounts. Note that the above mentioned cap for the SRS amount will be effective from 1st Jan 2016. Currently, the maximum amount you can contribute is $12,750 for Singaporeans and PRs and $29,750 for foreigners.
Since its inception back in 2001, there is a consistent improvement in the number of take ups each year . But even as of Dec 2014, we only have a total of 105,483 SRS accounts split across Singaporeans, PRs and foreigners. This take up rate is still a very low number compared to our working population.
Primary Benefits of Supplementary Retirement Scheme
Surprisingly, based on the above facts, we can see that not many Singaporeans truly understand how SRS can benefits Singaporeans to make their money work harder. Its primary key benefits allow you to save more for your retirement and pay less tax.
- Enjoy tax deferment on your SRS contributions by reducing your taxable income.
- 50% of your accumulated savings will not be taxed when you withdraw after reaching the statutory retirement age. You may spread your withdrawals over 10 years.
If you have an annual income of $100,000 and contribute $10,000 a year to your SRS account from age 40, you would have saved more than $350,000 when you retire at 62 years old (assuming an investment return of 4% per annum). At age 62, you can enjoy a 50% tax concession for your SRS withdrawals over 10 years. You can potentially withdraw $40,000 annually over 10 years completely tax-free. This means a tax savings of about $25,000.
|A DBS illustration of how Supplementary Retirement Scheme helps you save|
|Less: Personal Reliefs (Earned Income, CPF, Qualifying Child, Parent etc)||S$31,500|
|Without SRS||With SRS|
|Potential tax savings*||S$892.50|
Source : DBS Singapore. Do note that the above is just an illustration by DBS for the potential tax savings you can enjoy and the figures will vary when the new cap amount of $15,300 is effective from 1st Jan 2016.
Why Do You Need To Apply SRS Account now?
If you do not have this account, my advise to you is to setup for one now. How much funds to put in will be subjected to your financial status but you can just put a small amount say $100 to start with. There is a reason why i said so. This is because if the new law has passed to raise the retirement age from 62 to 67, setting up this account after the new law will also have the withdrawal age raises to the age of 67. Why you need to wait to even set up this account? The current withdrawal period between 62 to 72 will be ideal for a golden retirement for us. It will be a bit harder to predict if we can really enjoy our retirement from 67 to 77 or even beyond that.
How To Apply A SRS Account In Singapore?
If you have not opened such account, you may consider to open up one with any of the three approved banks namely DBS , OCBC and UOB. The applicant must be above the age of 18 and is not a bankrupt. It is quite easy to apply for a SRS account via internet banking.