Wednesday, November 30, 2011

Supplementary Retirement Scheme


The Sunday Times carried an article on Supplementary Retirement Scheme, which as the article may have rightfully pointed out, is not well-known among Singaporeans. I am among one of those Singaporeans who are not familiar with the scheme and hence reading the article enlightens me as to how this scheme-more commonly called SRS- works. Here is a short write-up of how it works:
First of all, all Singaporeans or foreigners can open a SRS account with banks like DBS and OUB. Upon opening the account, the account-holder can deposit any amount into the SRS account anytime to the statutory retirement age to a cap of $127,500. The amount he deposited into the SRS account before 31 Dec will be waived off from the income assessed for income tax and hence he can enjoy a lower income tax paid. If the holder is to withdraw from the SRS anytime, he would have to pay an interest. When the holder withdraws from the SRS upon retirement, he would have to pay income tax for half of the amount withdrawn in that particular year.
SRS is set up to supplement Singaporeans’ retirement needs. The monies tucked aside in SRS can also earn an interest. While I like the idea of saving up in SRS and reducing my income tax paid, I am not too happy for having to pay income tax for 50% of the SRS amount withdrawn when I reach retirement age and wants to withdraw. I believe one can earn a better return from good investments.

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