Supplementary Retirement Scheme (SRS) Changes From 1 October 2008

Supplementary Retirement Scheme (SRS) Changes From 1 October 2008

Source: Ministry of Finance Singapore: http://www.mof.gov.sg/taxation/srs.html

What is SRS?
The Supplementary Retirement Scheme (SRS) is meant to help the financial needs of a greying population, which were highlighted in the Report of the Inter-Ministerial Committee (IMC) on the Ageing Population, released in November 1999.

The Supplementary Retirement Scheme (SRS) complements the Central Provident Fund (CPF). Participation in Supplementary Retirement Scheme (SRS) is voluntary. You can contribute a varying amount to Supplementary Retirement Scheme (SRS) (subject to a cap) at your own discretion. The contributions may be used to purchase various investment instruments including bank savings account. The SRS took effect on 1st April 2001 and is operated by the private sector.

Supplementary Retirement Scheme (SRS) CHANGES IN BUDGET 2008

In Budget 2008, the Minister for Finance announced several enhancements to the Supplementary Retirement Scheme (SRS). The changes are listed in the following table. They will take effect from 1 October 2008.


The main attraction of Supplementary Retirement Scheme (SRS) is the attractive tax benefits:

- contributions to SRS are eligible for tax relief,

- investment returns are accumulated tax-free(except certain Singapore dividends) and

- only 50% of the withdrawals from Supplementary Retirement Scheme (SRS) are taxable at retirement.

If you want to learn more about how the Supplementary Retirement Scheme (SRS) works, and who can participate in it, go to Ministry of Finance website. It also explains the benefits of the scheme, and provides information on when and how you can make contributions or withdrawals, as well as where you can invest your Supplementary Retirement Scheme (SRS) funds.



Current Treatment
1 Employers cannot directly contribute to their employees’ Supplementary Retirement Scheme (SRS) accounts.

New Treatment (from 1 Oct 2008)

Employers can contribute to their employees’ SRS accounts, subject to the current SRS contribution limits, and claim full tax deduction. SRS members will enjoy tax relief on the contributions made by their employers.

Current:
2 SRS members can contribute up to the prevailing statutory retirement age. They can withdraw their Supplementary Retirement Scheme (SRS) monies over 10 years from the prevailing statutory retirement age.

New:
SRS members can contribute beyond the prevailing statutory retirement age, up to the point of their first penalty-free withdrawal. They can withdraw their SRS monies over 10 years from the date of their first penalty-free withdrawal. Withdrawals will continue to be penalty-free only if they take place after the statutory retirement age that was prevailing at the time of the first contribution.

Current:
3 Individuals without any earned employment income in the previous year cannot contribute to Supplementary Retirement Scheme (SRS) in the current year.

New:
Individuals without any earned employment income in the previous year can contribute to the SRS in the current year

The Budget Speech 2008 Annex on these changes can be found at http://www.singaporebudget.gov.sg/speech_p5/annexb-6.pdf


For members who are aged 62 or above on 1 October 2008, MOF will provide a one-off transitional concession so that they can take advantage of the new rules.

a. Those who have made penalty-free withdrawals and/or closed their accounts before 1 October 2008, but wish to continue to contribute to the Supplementary Retirement Scheme (SRS), may do so as long as they make a new SRS contribution between 1 October 08 and 31 December 2008. They can withdraw their Supplementary Retirement Scheme (SRS) monies anytime thereafter, and their 10-year withdrawal period will begin when they make their first penalty-free withdrawal. Once they start withdrawing, they will no longer be able to contribute again.

b. For those who do not wish to start contributing again or have not begun withdrawals, the new rules will automatically apply and their withdrawal period will end ten years from the date of their first penalty-free withdrawal.

Supplementary Retirement Scheme (SRS) And Saving Money For You

How does Singapore's Supplementary Retirement Scheme (SRS) apply to Singapore Savings Account Rates? In a nutshell, you can use SRS money to deposit it into your personal Singapore bank savings accounts. You earn interest on this principal. You also earn tax deduction in your income tax submission on this principal amount together with the interest earned.

You defer paying tax on this principal sum that you put into your Supplementary Retirement Scheme (SRS) account until you make a withdrawal from this Supplementary Retirement Scheme SRS account. At the time of withdrawal, 50% of the sum withdrawn (including interest money) will be subject to tax.

With the new Supplementary Retirement Scheme (SRS) changes, you can delay withdrawal of money from your Supplementary Retirement Scheme SRS beyond the official retirement age, at any time you choose. You can also stagger the principal amount withdrawn from the Supplementary Retirement Scheme SRS over ten years.

It is thought that by the time you need to withdraw this Supplementary Retirement Scheme (SRS) money, you would have fully retired and be earning zero income or very little earned income. Hence you will taxed at a low income tax bracket. As an illustration, if your total income for a year (including Supplementary Retirement Scheme SRS withdrawal) amounts to less than $20000, you pay zero tax.