Consider SRS top up for tax relief before 31 Dec

For Singaporeans/PRs, you can get tax relief of up to $3,366 in Year of Assessment 2021 with a personal contribution cap of S$15,300 if you top up your SRS by 7pm on 31 Dec 2020.

Foreigners have a cap of S$35,700.

Why top up SRS?

The Supplementary Retirement Scheme (SRS) is a voluntary contribution scheme that’s eligible for dollar-for-dollar income tax relief in the following year of assessment.

SRS is administered by our 3 local banks – OCBC, UOB and DBS – and is complementary to the CPF program, which is a mandatory contribution program.

Calculating SRS tax relief

The tax relief is equal to the amount contributed to SRS, capped at $15,300 per year. If you are a Singaporean, then you can get up to $15,300 of tax relief.

This is useful if you want to reduce your tax burden next year when IRAS assesses your income and it’s not limited to just high income earners.

Tax savings on a $56K annual income with SRS contributions. Source: UOB

Contribute to your SRS and pay less to the tax man!

Put your SRS contributions to work

When contributing to SRS, capital in there that’s not invested earns a mere 0.05% per year.

You can invest these monies through various approved financial products, with non-guaranteed returns. For example, there are funds (unit trusts), equities (SGX-listed stocks, REITs) and Singapore government securities to choose from.

You could also invest them through a roboadvisor and buy globally diversified portfolios and completely ignore about the “what to invest” part of the equation. For example, StashAway Simple and Endowus Cash Smart cash management portfolios (1.4% to 2% yields) are safe alternatives but higher yielding than pure cash.

As long as you’re planning to invest your SRS funds, you should be in a good position. Otherwise, consider a CPF SA top up instead (4% p.a.) capped at $7000 for individual contributions.

Withdrawing from SRS

You can withdraw your monies from SRS without penalties after statutory retirement age – currently it’s 62 years old. This is based on when you initially contributed your first SRS contribution (so lock in at least $1 early to lock your statutory retirement age!)

50% of the amount withdrawn is subjected to tax if you withdraw upon or after statutory retirement age.

If you do have to withdraw early, then you will need to pay income tax on 100% of the withdrawal amount plus a penalty of 5% on the withdrawal sum (except if you die or declared bankrupt).

CPF vs SRS top ups

SRS top ups are reversible but fees apply, while CPF SA top ups are locked until retirement and converted into CPF Life annuity payments for retirement. CPF SA yields 4% while idle cash in SRS earns 0.05%.

They are not exclusive, you can do both (up to specified limits) but consider your time horizon, investment decisions, future cash needs etc.

Note the personal income tax relief is capped at $80,000 per year.

You can also just lock $1 in your SRS account to lock in the statutory retirement age and deposit in future when you need to.


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