It is the last month of the year. This month, I finally opened my Supplementary Retirement Scheme (SRS) account with OCBC. I convinced my wife to do so as well.
I have done a little homework prior to opening a Supplementary Retirement Scheme account. My main reason for opening a Supplementary Retirement Scheme account is for tax reduction.
Contributions
Contributions to the Supplementary Retirement Scheme account are eligible for tax relief and only 50% of the withdrawals from Supplementary Retirement Scheme are taxable at retirement.
The below table is extracted from IRAS website and it shows the maximum Supplementary Retirement Scheme contribution we can make yearly.
| Year | Absolute Income Base* | Yearly Maximum SRS Contribution |
| 2011 to 2015 | $85,000 (17 months x $5,000) | $12,750 (15% of $85,000) |
| 2016 onwards | (17 months x $6,000) = $102,000 | 15% of Absolute Income Base (15% x $102,000) = $15,300 |
*The Absolute Income Base is calculated on 17 months of the CPF monthly salary ceiling.
Withdrawal
At the current statutory retirement age of 62, I will be able to start withdrawing money from the Supplementary Retirement Scheme account over a period of 10 years.
I can start withdrawing $40,000 per year at age 62.
Only 50% (i.e. $20,000) of the withdrawal amount is regarded as taxable income. Taking YA 2016 as an example, no tax will be paid as the tax rate is zero for the first $20,000 of the individual’s chargeable income.
Unless at 62; we have no taxable earned income; then withdrawal of SRS make full financial benefits
That’s what I have planned.
SRS is a good strategy to reduce tax. I had the SRS account for 5 years and it is part of my retirement tools. I used srs acc to invest.
Congratulations! I’ve had my SRS account for a while now and started contributing it for the past 2 years.
The goal should be to accumulate up to $400,000 in there (either through contribution or investment gains) so that from 62 onwards, you can withdraw $40,000 each year tax-free. 🙂