Personal Finance Singapore Market

Reducing Taxes While Saving For Retirement Through SRS Contributions

Calvin Lo

As we draw closer to the end of the year, it’s a good time for us to estimate our personal income taxes and try to reduce our tax bill by contributing to our Supplementary Retirement Scheme (SRS) account.

This post was originally posted in 2022 and updated on 26 December 2023.

What is SRS?

SRS allows both Singaporeans and foreigners to contribute cash for retirement and be entitled to tax relief. As the name suggests, SRS is meant to supplement CPF, which is meant to provide a baseline retirement income.

Key considerations

  1. Annual contribution limit to SRS is $15,300 for Singapore citizens and PRs, and $35,700 for foreigners (since foreigners are not entitled to CPF).
  2. You need to contribute to SRS by 31 December if you want to qualify for tax relief for this year’s tax assessment.
  3. Personal tax relief is capped at $80,000 per year of assessment (YA), so if you need to know what your other tax reliefs before SRS contribution.
  4. For withdrawals from SRS after retirement age* (currently 63), only 50% of funds withdrawn are subject to tax.
  5. Early withdrawal is possible before retirement age*, but 100% of funds withdrawn will be taxed and an additional 5% penalty will be imposed.
  6. Once you start withdrawing from SRS, you will only have a 10-year window to withdraw everything out.

*Note: Retirement age is the statutory retirement age that was prevailing when you made your first SRS contribution.

So, even if you don’t intend to contribute to SRS this year, you should seriously consider opening one if you haven’t and contribute a token $1 to lock in the retirement age at 63 to qualify for 50% tax concession for withdrawals. Note that the statutory retirement age in Singapore is expected to increase to 65 by 2030.

Read this post by Seedly: SRS Account Hack: Why You Should Top Up $1 to Your Supplementary Retirement Scheme Account

How to contribute to SRS

You can easily apply for an SRS account with the 3 local banks DBS, OCBC, and UOB. I opened mine with DBS via digibank online. Thereafter, you can just transfer funds into the SRS account just like any other bank account.

At least for DBS, they indicate the max contribution limit ($15.3k in 2023), total contribution to date, and balance contribution limit.

How to invest your SRS funds

SRS accounts, unlike CPF accounts, only pay a lowly interest rate of 0.05% (as at time of writing). So, it would make sense to invest your SRS funds into other securities to earn a better return.

You don’t have to limit yourself to investing your SRS funds through the bank that you opened your SRS account with. You can link it with other financial institutions to invest into a pretty wide variety of securities like stocks, bonds, ETFs, unit trusts, SGS, fixed deposits, insurance products. However, most are restricted to SGX-listed securities (except UTs).

Read this post from Dollars & Sense: 10 Investments You Can Make With Your Supplementary Retirement Scheme (SRS) Account

SRS investments are mostly limited to SGX-listed stocks & ETFs and a handful of local robo-advisors. If you want to invest in an S&P 500 ETF, there’s one listed on the SGX – SPDR S&P 500 ETF Trust (ticker: S27). Alternatively, you could consider investing into S&P 500 low-cost funds via Endowus.

Personally, I’m using Endowus to invest my SRS funds. If you’re interested, sign up with my referral code J5HPB or through this link and invest S$1,000, both of us will get S$20 Endowus fee credits.

Source: Endowus

What I’m doing

Last year, I opened my SRS account and contributed $3k to try to bring my chargeable income back to the lower bracket. This year, I’ve contribute another $3k. Although my pay has increased, I’m short of cash this year after spending quite a bit on our home renovation. So far, I’ve invested $2k into the iShares US Index fund (IE) S&P 500 and $4k into Cash Smart Secure.

Screenshot of my Endowus account goals

Read also: Which S&P 500 fund should I pick for exposure to top US stocks?

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Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

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Disclosure: This post may contain affiliate links and I may get a commission when you click on the links or open an account through the links, at no additional cost to you. I only recommend products or services that I have personally tried and have found useful.

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2 thoughts on “Reducing Taxes While Saving For Retirement Through SRS Contributions”

  1. Pingback: How I Manage My Cash Between SSB, T-Bills, Fixed Deposits and Cash Funds | Finance Gnome
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