Did you know that you could enjoy some
tax advantages in this process? This article takes you through what the
Supplementary Retirement Scheme (SRS) is about, and the tax benefits available
if you choose to save for your retirement via this scheme.
What is the SRS?
It is a voluntary savings scheme introduced by the Government to encourage individuals like you to save more for retirement, above what you contribute to the Central Provident Fund (CPF).
It is a voluntary savings scheme introduced by the Government to encourage individuals like you to save more for retirement, above what you contribute to the Central Provident Fund (CPF).
Keys Benefits of participating in the SRS
·
Both you and your employer can contribute to your SRS account.
·
Contributions to SRS are eligible for tax relief if you are
assessed as a tax resident.
·
You can invest the funds in your SRS account.
·
Investment gains are tax-free before withdrawal.
·
Only 50% of the withdrawals from SRS are taxable at retirement.
Is the SRS suitable for me?
The SRS is intended to help you save
for your retirement. If you choose to withdraw your savings earlier than the
statutory retirement age, you will have to pay tax on the full withdrawal and a
penalty of 5%. Therefore, when considering whether to participate in the SRS,
you should review your financial circumstances to ensure that you do not need
to draw on your SRS savings until you reach the statutory retirement age.
How much tax savings
can I have?
How do I participate in the SRS?
You can open an SRS account in person
at any branch of the Government-appointed SRS operators, as long as you are at
least 18 years of age and
not an un-discharged bankrupt or of unsound mind. Currently, the three SRS
operators are DBS, OCBC and UOB.
What can I invest my SRS savings in?
The
SRS savings in your account can be invested in a variety of financial products,
including those offered by financial institutions (product providers) other
than your SRS operator. You should note however that the SRS scheme does not
guarantee any specific rate of return on your investments. Your actual returns
will depend entirely on the investment choices you make. Direct property
investments are not allowed and certain life insurance products are subject to
restrictions.
Example
Suppose
you start contributing when you are 30 years old and save up to the
contribution limit of $12,750 each year until you turn 62.
If
you achieve a 5% annual rate of return through your investment choices, your
savings could grow to $860,000
in your SRS account by the time you turn 62. However, if the performance of
your investment is not favourable, you may incur losses.
In
comparison, if you had kept your money in a savings account that offers an
interest rate of 0.5% per annum, you would have accumulated about $400,000.
When
to contribute
You and your employer may contribute to SRS at any time of
the year and as often as you wish, subject to the maximum SRS
contribution for the year. To be eligible for the tax relief, all
contributions whether in cash or by cheque deposits must be made or cleared by
31 Dec of the year, or as specified by your SRS operator.
The maximum SRS contribution for a
Singaporean/Singapore permanent resident and foreigner are $12,750 and $29,750
respectively in the year 2013.
Resource: Moneysense & iras.gov.sg
Things you need to do before 31 Dec
2014
Step 1: Check your
eligibility
Step 2: Open an SRS
account with any local banks DBS, OCBC, or UOB
Step 3: Deposit funds into your SRS account before
31 Dec 2014 to enjoy tax benefits for year 2014
Step 4: Link your SRS
account with your POEMS trading account
Step 5: Invest your SRS saving in Dividend stocks or ETFs via POEMS trading account
Need help? Contact Us and we will be more than happy to assist you
