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Supplementary
Retirement Scheme (SRS)
As the adage goes, “It is never too early to plan for retirement”.
So no matter what lifestage you may be in, retirement planning should
be an integral part of your financial planning activities.
The Supplementary Retirement Scheme (SRS) is an invaluable resource
that can help bring your retirement dreams that much closer to
reality. And you’ll enjoy tax savings too!
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What is the Supplementary
Retirement Scheme (SRS)?
The Supplementary Retirement Scheme (SRS) is part of our
Government’s multi-pronged strategy to address the financial
needs of a greying population. With SRS, the government hopes to
encourage Singaporeans to save more for their golden years, by means
of voluntary contributions to their SRS accounts.
The SRS is a voluntary retirement savings scheme targeted at working
individuals aged 21 and above. When you participate in the SRS,
you have full freedom to determine when and how much (subject to
a cap) you contribute into your SRS account.
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What
are the benefits of participating in the Supplementary Retirement
Scheme SRS?
The main attraction of SRS is its tax incentive. |
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Contributions
to SRS are eligible for tax relief |
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Investment
returns are accumulated tax-free (with the exception of Singapore
dividends) |
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Only 50% of
the withdrawals from SRS are taxable at retirement
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With immediate effect for
the Year of Assessment 2007, a common absolute cap of 17 months
of the prevailing CPF salary ceiling is applied to all SRS
contributions as follows: |
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$11,475
for Singaporeans/Permanent Residents, i.e. 17 months
x CPF Salary Ceiling of $4,500 for year 2005 x 15% SRS contribution
rate. |
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$26,775
for Foreigners, i.e. 17 months x CPF Salary Ceiling
of $4,500 for year 2005 x 35% SRS contribution rate. |
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For the self-employed,
the same contribution cap based on 17 months of prevailing
CPF salary ceiling will apply. |
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How does a contribution
to the SRS give rise to tax savings?
To recapitulate on the benefits of SRS, there is a tax
savings of $1,330.50 as illustrated in the table below. It assumes
a Singaporean who earns $80,000 (OW) and $20,000 (AW) in year 2005
and wants to contribute $11,475 in his SRS account to qualify for
tax relief in the Year of Assessment 2006.
No contribution
to SRS |
| Employment income |
$100,000
_______ |
| Assessable income |
$100,000 |
| Less reliefs: |
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| - Earned income |
$1,000 |
| - CPF contributions |
$17,000 |
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| Chargeable income |
_______
$82,000
_______ |
| 1st $80,000 |
$4,450 |
| Next $2,000 @ 14.5% |
$290
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| Total tax payable |
$4,740 |
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With max. contribution
to SRS |
| Employment income |
$100,000
_______ |
| Assessable income |
$100,000 |
| Less reliefs: |
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| Earned income |
$1,000 |
| CPF contributions |
$17,000 |
| SRS contributions* |
$11,475 |
| Chargeable income |
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$70,525
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| 1st $40,000 |
$950 |
| Next $29,250 @ 8.75% |
$2,670.90
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| Total tax payable |
$3,620.90 |
| TOTAL SAVINGS |
$1,119.10 |
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| * Based
on OW of $80,000 & AW of $20,000, subject to a cap of $76,500
with a contribution rate of 15% (ie. $12,750) |
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Great Eastern
Life Products available through SRS
To give your SRS savings the extra boost, we have a range
of products that are catered to meet your individual risk appetite
and investment requirements.
Click on the links for more details, or call your
Life Planner from Great Eastern. Alternatively, you may submit an
online
enquiry now!
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