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Supplementary Retirement Scheme (SRS) is a voluntary saving scheme introduced by the government to encourage Singaporeans to save more for their old age. Singaporeans and foreign workers can open an SRS account at any branches of the 3 SRS Operators - DBS, OCBC and UOB. Participants can then contribute up to $11,475 (for Singaporean, or $26,775 for foreign workers) to SRS at their own discretion yearly.

One immediate benefit for participating in SRS is that you can claim tax relief for contributions made to SRS. Each dollar of SRS contribution will reduce your income chargeable to tax by a dollar. This works out to be a total savings of up to $2,000, depending on your Income Tax Bracket and the SRS contribution. You will need to contribute to the SRS account before 31 Dec of each year in order to enjoy the tax relief in the next year of assessment of income tax.

Before end of this year, you can reduce your income tax by contributing to your Supplementary Retirement Scheme (SRS). And read on NTUC income products that will help to grow your SRS money that beat the silent thief, i.e. inflation. 

Example 1: Mdm Lim earns $3,500 a month and contributes $6,300 to SRS.

Example 2: Mr Chan earns $7,000 a month and contributes the maximum of $11,475 to SRS.

* Assuming no other tax relief claimed.
** Subject to a cap of $11,475 for Singaporean/PR.
*** Individual Income Tax Rate for FY2007/2008

With effect from 1 Oct 2008,

• Employers can contribute to their employees’ SRS accounts and claim full tax deduction. Employees will enjoy tax relief on the contribution made by their employers.

• SRS members can contribute beyond the prevailing statutory retirement age when the SRS account was opened, up to the point of their first penalty-free withdrawal. The SRS monies can be withdrawn over the next 10 years from the date of the first penalty-free withdrawal.

• Individuals without any earned employment income in the previous year can also contribute to the SRS in the current year.

For Singapore Citizen and Permanent Resident, you will be able to withdraw the SRS money from age 62 or the official retirement age when you open the SRS account. As only the 50% of the amount withdrawn are subjected to income tax, you can plan and spread out the withdrawal amount for the next 10 years to minimize the chargeable income tax.

However, if you withdraw before the penalty-free period, there will be a 5% penalty on the withdrawal amount. This 5% penalty will be waived for bankrupts. If the withdrawal is made due to death, total permanent disability, unsound mind or other medical ground, besides waiving the 5% penalty, only 50% of the withdrawal amount is subjected to Income Tax.

For foreigners, you are allowed to withdraw the SRS monies with 50% subject to tax as long as you have maintained the SRS account for at least 10 years from the date the first contribution has been made.

The amount deposited into SRS account will earn you meagre % of interest rate offers by the bank. You can, however, use the SRS contributions to purchase various investment instruments such as shares and insurance policies from NTUC Income Growth Plan, SAIL or Growthlink (Investment-linked Policy) that earns you much better returns. The key benefits for the newly launched Income products are described at the side of this article on the left column.

A comparison of the expected return from various Investment Instrument for a period of 20 years of principal amount $11,475, and the Pros and Cons of the different investment strategies are given below.

For more information on SRS and individual income tax rates, visit the Ministry of Finance website at http://app.mof.gov.sg/supplementary_retirement_scheme.aspx.

For more information on NTUC Income insurance/investment plans, visit the NTUC Income website at http://www.income.com.sg.