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Upon withdrawal of your money in SRS at the prevailing statutory retirement age, only 50% of the amount withdrawn will be taxed as income.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withdraw the money before retirement, 100% of the amount will be taxed PLUS a 5% penalty will be charged on the amount withdrawn.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.