Tag Archives: CPF

Supplementary Retirement Scheme (SRS)

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Your Nest Egg

What is the SRS all about?

The Supplementary Retirement Scheme (SRS) was implemented by our Singapore government on 1 April 2001 (Definitely not a April Fool’s joke) to complement our Central Provident Fund (CPF) savings. Our CPF savings were meant to provide for housing and medical needs and for basic living needs after retirement.  SRS contributions are voluntary and are tax deductible on the following year. Contribute in 2010, tax deductible in 2011.

Upon withdrawal of your money in SRS at the prevailing statutory retirement age, only 50% of the amount withdrawn will be taxed as income. You are allowed to spread your withdrawals over a period of up to 10 years  to meet your financial needs. This will result in greater tax savings since you do not have an active income.

If you withdraw the money before retirement, 100% of the amount will be taxed PLUS a 5% penalty will be charged on the amount withdrawn. The 5% penalty will not be imposed if the withdrawal is due to death, medical grounds, bankruptcy and a full withdrawal by a foreigner who has maintained the SRS account for 10 years.

The computation of the SRS contribution cap is calculated by multiplying the SRS cntributin rate by the absolute income base. The absolute income base is 17 times of the prevailing monthly CPF cap of $4500. The SRS contribution rate for Singaporeans and Singapore Permanent Residents (SPRs) is 15% while the SRS contribution rate for foreigners is 35%. That means the maximum contribution per year is $11,475 for Singaporeans/PRs and $26,755 for foreigners.

Since 1 October 2008, employers have been allowed to make SRS contribution directly into their employees SRS accounts and deduct them as business expense.

All Singapore Permanent Residents (SPRs) and foreigners who make a withdrawal from their SRS accounts will be subject to a withholding tax on their withdrawal. The withholding tax rate is the prevailing non-resident tax rate of 20% at the point of withdrawal. There is no withholding tax on withdrawals by Singaporeans.

Please read the Supplementary Retirement Scheme Booklet 2009 for more details.

What Happens To Your CPF Savings After You Die?

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CPF

Central Provident Fund Board

This question may often pop up when you are at someone’s funeral but are you clear what the real answer is?

CPF has clearly stated in it’s website that ALL the CPF savings in the Ordinary, Special and Medisave accounts as well as the discounted SingTel shares bought in 1993 when SingTel went public, will be distributed to his nominees according to the proportion stated in his nomination form.

If you have not made a nomination, your CPF savings will be distributed to your family members according to Singapore’s Intestacy laws. Muslims will have to follow the Inheritance Certificate from the Syariah Court.

If you have invested your CPF savings, the Dependent Protection Scheme (DPS) claims proceeds and properties bought using CPF savings are NOT covered by the CPF nomination. You should have a valid will to cover these assets. Properties held with the legal status of “Joint Tenancy”, usually with your spouse, is not affected as it will automatically vested in the spouse name. But your spouse should have a will too, in case both die at the same time.

If you are getting married soon, make a new nomination after marriage as your previous nomination while you were single will no longer be valid.

If you are divorcing your spouse soon and no longer want to leave any money to your spouse, make a new nomination as your previous nomination is still valid even when you divorce!

Click here for the nomination form and instructions.

CPF Nominations – What is covered