Supplementary Retirement Scheme
Defer tax and save for the future
Reduce your tax exposure and save for retirement. Seems like a win-win scenario, so let's talk about Singapore's Supplementary Retirement Scheme (SRS) and how it could work for you.
SRS is a voluntary scheme available to all taxpayers in Singapore as an incentive to save towards retirement. A great option for self employed expatriates, SRS allows you to set aside a portion of your income before tax in approved investment accounts. Foreigners can contribute up to $35,700 per annum, with Singaporeans and Permanent Residents allowed $15,300.
Major benefits of an SRS account
1. Only 50% of the funds invested in an SRS account are taxed at withdrawal.
2. Taxation is assessed at your income tax level at time of withdrawal.
3. Withdrawal can be spread out over up to 10 years, creating a regular income stream in retirement.
4. Flexible investment options: SRS contributions can be used to purchase a wide variety of investments including; unit trusts, ETF, shares, bonds, and even the exercise of company stock options.
Of course there are some rules and regulations. You can't touch funds in an SRS account for a minimum of ten years. If you choose to cash out an account early the entire sum would be subject to taxation, and a 5% penalty incurred, making it a very expensive investment.
You also can not withdraw funds until you hit the current Singapore retirement age of 62. Foreigners are exempt from this rule if they have held the account for the minimum 10 year period, and exemptions are also in place to waive penalties with regards to premature death, bankruptcy, and medical grounds.