From 1 February 2019, Singaporeans can invest up to $200,000 of their funds into Singapore Savings Bond (SSB), up from the current limit of $100,000. Also, the Supplementary Retirement Scheme (SRS) funds can also buy into the SSB from the same effective date, great news to those (33% of SRS funds) who have been leaving their money in the savings account, earning the meagre savings interest rate of around 0.1% p.a.
Recall that Singapore Savings Bond is a 10-years savings bond offered by the Government. What makes this SSB stands out from the other bonds is that you can terminate the bond anytime without penalty, and you earn the interest for the period that you hold on to the bond. But do note that the trend is higher interest rate is being offered for the first few years. If you hold on to the SSB for the full 10 years, the overall interest rate is not as attractive compared to other financial products that locked you for 10 years.
Currently, an SRS member can withdraw up to $40,000 per year from his SRS account tax-free on or after reaching the prescribed retirement age, assuming that he has no other taxable income. Over the maximum withdrawal period of 10 years, he can withdraw up to $400,000 tax-free.
However, if an SRS member passes away before completing his SRS withdrawals or made a full withdrawal on the grounds of terminal illness, he would not be able to enjoy the full benefit from spreading out his SRS withdrawals over a 10-year period. Hence, from year of assessment 2016, a tax exemption of up to $400,000 would be granted for SRS funds deemed withdrawn upon an SRS member’s demise or a withdrawn in full on the grounds of terminal illness.
Next, from July 2015, SRS members will be able to apply to their SRS operators to withdraw an SRS investment by transferring the investment out of their SRS accounts (e.g. into their personal Central Depository (CDP) account), without having to liquidate their SRS investments. This is only applicable for the following types of withdrawals, which qualify for the 50% tax concession:
- withdrawal on or after the statutory retirement age prevailing at the time of an SRS member’s first contribution (currently age 62);
- withdrawal on medical grounds;
- withdrawal in full by a foreigner who has maintained his SRS account for at least 10 years from the date of his first contribution; and
- actual withdrawal made by an SRS member or his legal personal representative (if he is deceased) from his SRS account, after the SRS investment that is to be withdrawn had earlier been deemed withdrawn upon death or after the expiry of the 10-year withdrawal period.
All other withdrawals from an SRS account, including premature withdrawals, must be made in cash.