Your guide to the Supplementary Retirement Scheme (SRS)

The Supplementary Retirement Scheme (SRS) is one of Singapore’s best kept secrets — and it's time to set it free. Not only is the scheme a great way to save more for your retirement, it is also a nifty hack to lower your tax bill today. 

• Singaporeans & permanent residents (PRs) can save up to $3,366* in taxes
• Foreigners can save up to $7,854* in taxes

*assumes $0 for current eligible tax relief, and SRS contribution made from the 22% tax bracket.

And here’s the best part: SRS is not just for older Singaporeans or high-income earners. It’s for everyone. To help you get started, here’s a quick summary of why SRS matters and how it works. 

<divider><divider>

What is the Supplementary Retirement Scheme?

It is a voluntary savings scheme that complements your Central Provident Fund (CPF) savings for retirement. With SRS, you can build more savings, on top of your CPF monies. Enjoy tax reliefs now and use your SRS to generate a steady income stream or grow your nest egg for your golden years.

SRS is an attractive income tax deferment scheme for all in Singapore — Singaporeans, PRs, and foreigners. There are two parts to this tax incentive: 

1. SRS lets you postpone how much to pay on your tax bill now.
2. SRS also allows you to pay less taxes later in your retirement years. If you stagger your SRS withdrawals at retirement well, you can even withdraw tax-free every year.

<divider><divider>

How does SRS work?

Every year, every Singaporean is allowed to set aside no more than $15,300 in an SRS account — which can be set up at one of three local banks here.

When you do so, $15,300 will be deducted from your personal income before your current tax bill is calculated. Simply put, you have reduced the base income that you pay your taxes on now.

To break it down further, Singaporeans can make their annual SRS contributions in three main ways:

1. Automatically setting aside $1,275 a month to make the full $15,300 by 31 Dec;
2. Topping up the SRS account as and when your cash flow allows, right up to the limit;
3. Putting in a lump sum of $15,300 by 31 Dec.

Read on for a simple illustration showing how you can cut your tax bill and tackle inflation with SRS.

Use our SRS calculator to better understand your tax savings under the scheme.

<divider><divider>

A comprehensive guide to SRS for expats

With soaring rental costs, high costs of ownership of cars, and expensive private school fees, Singapore can be an expensive place for expatriates to live in. SRS can be one way for foreigners working in Singapore to defer taxes paid on income earned.

Foreigners have a higher SRS contribution limit of $35,700, as they are excluded from tax relief via CPF contributions.

To make the best use of SRS, expats will need to note the rules specified for foreigners. That’s especially so when it comes to understanding:

• The penalty on early SRS withdrawal;
• Which tax rates will apply at the point of withdrawal;
• How withholding taxes are imposed on SRS withdrawals.

Learn more about SRS withdrawals and what the SRS sweet spot is for expats.

<divider><divider>

Is there a deadline?

SRS runs on an annual contribution limit. The annual SRS tax relief quota resets at the start of every new year.

This means that to maximise your tax relief, you will need to contribute to the annual limit by 31 December of each year.

If you're reading this with just a few weeks left to the year-end, it will be a good idea to try to use up your quota if possible.

<divider><divider>

Why should I invest my SRS? (spoiler: inflation)

While SRS is a highly tax-efficient scheme, SRS monies earn just 0.05% interest per annum (p.a.). These monies may be taxed less in the future, but are losing their purchasing power if left idle, especially with high inflation now.

An increase in long-term inflation from 1% to 3% will mean a whopping 45.8% decrease in retirement savings in real terms.

<divider><divider>

Where can I invest my SRS?

There are many ways to invest your SRS money — including unit trusts, SGX-listed stocks, real estate investment trusts (REITs), and exchange-traded funds (ETFs). Some may also wish to keep their savings in fixed deposits or use them to buy insurance products.

While there are advantages to the different investment options, there are also some disadvantages to consider when investing your SRS in high-yield instruments.

Read about which SRS investment options might be suitable for you and which are unlikely to be favourable.

When investing your SRS with Endowus, you get globally diversified exposure easily, you do not incur any foreign exchange charges, and there are no rebalancing and transaction costs.

More resources on SRS

Curious to learn more? Here are further tips to optimise your SRS savings and supercharge your retirement plan.

• How to reduce your income tax through CPF and SRS top-ups
• Understanding the latest Singapore income tax reliefs ‍
• Can you pay too much taxes for SRS withdrawal?
• Webinar: Planning for retirement and tax relief despite record inflation

Here's how to start investing your SRS money in best-in-class funds with Endowus. If you're new to Endowus, you can join us by creating an account seamlessly.‍

Next on the Endowus Fin.Lit Academy

Read the next article in the curriculum: Debunking myths behind SRS