Can I use my SRS account balance as collateral, security or guarantee for any financial transaction?

No.

Is my SRS account balance protected from creditors?

No.

What is the criteria for Approved SRS fund Managers and how does a fund manager register itself as an approved manager?

Any financial institution licensed by MAS may offer its products to SRS account holders. There is no additional registration process for SRS product providers. However product providers should clarify with the SRS operators the settlement procedures for SRS transactions.

We want to highlight that SRS product providers must generally 'tag' the product purchased with SRS funds. Specifically, an SRS product provider must comply with the following:

• It must return the cash from the liquidation of any product originally purchased with SRS fund to the SRS account (i.e. to the SRS operator) and not to the account holder directly.

• It should be prepared to supply any information relating to the SRS investments to the SRS operators (which they may need in fulfilling their reporting requirement prescribed by the authorities).

• All returns from the investments (distributions, dividend etc) must also be paid to the SRS account and not to the account holder directly.

Can I nominate a beneficiary for my SRS funds?

We do not have a provision in the SRS allowing for the nomination of a beneficiary of an SRS account. When an SRS account holder passes away, the SRS balances forms part of his estate and will be distributed according to his will or the law (if a will does not exist). There will be no 5% penalty on withdrawal and only 50% of the withdrawal will be subject to income tax. Please note that SRS operators may require the Grant of Probate or Letters of Administration to be produced by the executor or administrator of the estate to ensure that the assets in the SRS are distributed correctly.

Can an SRS account holder transfer his balance in the SRS account to the CPF special account?

An SRS account holder is not permitted to transfer his balance in the SRS account to the CPF special account. This is because the SRS and CPF are two different retirement schemes. Unlike the CPF scheme, which is a completely tax exempt scheme, the SRS scheme is a tax deferral scheme. SRS contributions qualify for a tax relief but 50% of the withdrawals made at or after retirement are taxable. Any transfer of balances out of the SRS account constitutes a taxable withdrawal.

CPF qualifies for more favourable tax treatment than SRS because CPF caters for basic retirement needs while SRS caters for supplementary retirement needs. Allowing the transfer of monies between the two schemes blur the distinction between the scheme and goes against the objective of having two schemes in the first place.

Which income group is most likely to benefit from the SRS scheme?

Any non-SRS contributor who currently pays tax will enjoy tax savings in the following year if he or she starts making SRS contributions based on his or her preceding year's earned income.

50% of SRS withdrawal is taxable without distinguishing capital gains, income and contribution. Is the Government taxing capital gains with the introduction of SRS?

SRS is a tax deferral scheme. Under a typical tax deferral scheme where a sum of money is not taxed upfront but instead taxed at a later time after netting off all subsequent capital gains and losses from investments, the individual will be no worse off than if the sum of money was taxed upfront and all subsequent capital gains were exempt from tax.

As an illustration, consider a person who has an earned income of $10,000. Assume his marginal tax rate is 10%. He pays an income tax of $1,000 and invests the balance of $9,000. He makes a capital gain of 3% each year until he reaches the retirement age 10 years later. Assume his marginal tax rate remains at 10% at retirement. At the end of 10 years, he will have a total of $12,095.

Total = ($10,000 * 0.9) * 1.03 * 1.03 *….(for 10 years) = $12,095

Next, consider another person with the same earned income of $10,000 but who invests the sum under a tax deferral scheme. He does not pay income tax on $10,000 and is able to invest the full $10,000. He makes the same capital gain of 3% each year until he reaches the retirement age 10 years later. The capital gains accumulate tax-free in the account. At the end of 10 years, everything in the account is taxed at the same marginal tax rate of 10%. After paying tax, he will also have a total of $12,095.

Total = $10,000 * 1.03 * 1.03 *….(for 10 years) * 0.9 = $12,095

In fact, under the SRS, the individual will be better off, as only 50% of the withdrawals will be taxed. The same person above will have a total of $12,768 if he withdrawals everything in the first year of retirement.

Total = 0.5 * ($10,000 * 1.03 * 1.03 *….(for 10 years))
+ 0.5 * ($10,000 * 1.03 * 1.03 *….(for 10 years)) * 0.9
= $12,768

He will have even more if he spreads his SRS withdrawals over a period of 10 years (or more if the statutory retirement age increases), which is allowed under the SRS.

Why is the tax treatment of SRS withdrawals not changed even though locally-sourced investment income is now exempted from tax?

The current tax treatment of SRS withdrawals is already attractive. Only 50% of SRS withdrawals at/after retirement age are taxed. With careful planning, a retiree who is likely to have a low marginal tax rate, may end up paying little or no tax on his SRS withdrawals.

If I have already contributed an amount equal to my SRS contribution cap, but still do not have sufficient cash in my SRS account to exercise my rights entitlement in respect of shares bought using my SRS funds previously, can I make an additional contribution to meet the shortfall?

No. You may however sell your rights entitlements or sell some other investments in your SRS account to exercise your rights entitlements

If you have further queries, you may refer them to your SRS operator, or contact us via the following: