When can I make a withdrawal from my SRS account?

Anytime. However if you make a withdrawal before the statutory retirement age prevailing at the time of your first contribution, 100% of the sum withdrawn will be subject to tax. A 5% penalty for premature withdrawal will also be imposed.

Are there circumstances under which the 5% penalty for premature withdrawal does not apply?

Yes, these circumstances are:

I made a premature withdrawal recently and had to pay a penalty on the withdrawal. If I were to reinstate the amount withdrawn, would the amount of penalty paid earlier be refunded to my account?

No. You cannot expect a refund of the penalty to your SRS account by reinstating the amount that was withdrawn prematurely.

How much can I withdraw from the SRS account?

You may withdraw any amount of SRS savings you desire. There is no specified minimum or maximum sum of withdrawal.

Can I make SRS withdrawals in the form of investments (i.e. transfer investments out of SRS account)?

No. All SRS withdrawals must be made in cash.

How will my withdrawals be taxed?

Withdrawals from SRS accounts are subject to tax in the Year of Assessment following the year of withdrawal.

For example, if you withdraw $6,000 from your SRS account in 2007, either 50% or 100% of the withdrawal amount, depending on the type of withdrawal (see below), will be regarded as part of your income in 2007 and subject to tax for Year of Assessment 2008.

50% of the sum withdrawn will taxed for the following types of withdrawal:

100% of the sum withdrawn will be deemed as your income and taxed in all other situations.

If you are a non-Singaporean who no longer works and lives in Singapore, you will be taxed as a non-resident when you withdraw the fund from your SRS account.

Can I spread my withdrawals over a period of time so as to enjoy the 50% tax concession?

Yes, if you withdraw your SRS savings at or after the statutory retirement age that was prevailing when you made your first SRS contribution or on medical grounds. The maximum period over which you can spread your withdrawals is 10 years. The 10-year period will start from the date of your first such withdrawal.

How exactly is the withdrawal period determined at retirement?

The withdrawal period starts when you make your first withdrawal at or after the statutory retirement age that was prevailing when you made your first SRS contribution. It will end 10 years from this date.

However, the 10-year period does not apply to investments in life annuities. So long as you continue to receive your annuity streams in perpetuity, the 50% tax concession will apply.

Do I have to withdraw all my SRS funds at the end of the 10-year withdrawal period?

No. However, whatever remains in your SRS account at the end of the withdrawal period will be taxed at 50% concession.

Will the SRS Operator deduct any tax on my SRS withdrawals?

There is a withholding tax imposed on all SRS withdrawals by foreigners and SPRs. The SRS Operator will withhold an amount of tax at the prevailing non-resident tax rate. Hence, the actual amount of cash you receive will be less than the amount you requested to withdraw. For Year of Assessment 2008, the rate of withholding is 20%. This is in addition to the 5% premature withdrawal penalty, if applicable.

As savings withdrawn from SRS are subject to tax, would I not be paying a lot of tax when I retire?

No, only 50% of your withdrawals are subject to tax. Moreover, you are allowed to spread out your withdrawals over a period of time. With lower or nominal income at retirement, you may end up paying little or no income tax.

Can I withdraw my SRS money before the age of 62? I might be in poor health and need the money for medical treatment, or I might retire early before the age of 62.

SRS account holders may withdraw their SRS savings anytime, albeit early withdrawals are fully subject to tax and attract a 5% penalty.

To incentivise individuals to withdraw their SRS at age 62 (the statutory retirement age) or later, the Government grants a 50% tax concession (only 50% of the withdrawal is subject to tax) for such withdrawals. Such withdrawals also do not attract a 5% penalty.

We appreciate that some individuals may wish to retire before the age of 62, but we would still want to encourage them to keep their savings for their old age, after age 62. We want to highlight that individuals who are physically or mentally handicapped (for example bedridden) may withdraw their SRS savings penalty-free and with a 50% tax concession anytime, regardless of their age.

SRS is a voluntary scheme and the contributions are determined by each individual. If a person wishes to have access to funds before the statutory retirement age, he may wish to set aside some funds outside of SRS savings.

If I am a foreigner and start contributing to SRS at the age of 55, am I allowed to withdraw my SRS contribution without penalties, at the age of 62? Do I need to wait for 10 years to make a penalty-free withdrawal?

A foreigner may withdraw his SRS without penalties at the age of 62, if that is the statutory retirement age prevailing at the time of his first contribution.

I am a foreigner who no longer works and lives in Singapore and I make an SRS withdrawal. How will I be taxed?

A foreigner will be taxed as a non-resident in this instance. He will generally be taxed at 15% or the local resident rate, whichever is higher. If the withdrawal is made after the statutory retirement age or more than 10 years after the date of the first contribution, only 50% of the SRS withdrawal will be subject to tax.

I wish to purchase a single premium insurance product which will mature at the age of 65. Is it allowable under SRS? If yes, when will my last withdrawal age be?

Such a product is generally allowable. The end of the withdrawal period is pegged to 10 years from the first withdrawal made having attained the statutory retirement age that was prevailing when you made your first SRS contribution. The investment may mature anytime within the 10-year withdrawal period (Please see Q. 60).

Please explain the withholding tax imposed on the withdrawal of SRS funds.

All Singapore Permanent Residents (SPRs) and foreigners who make a withdrawal from their SRS accounts will be subject to a withholding tax on their withdrawal. The withholding tax rate is the prevailing non-resident tax rate, which is 20% in YA2008.

For example, if an individual has accumulated $200,000 in his SRS account by the age of 62 (the retirement age) and decides to withdraw all his SRS monies, he will taxed on half of the amount withdrawn as a result of the 50% tax concession. If he is a SPR or a foreigner, the tax withheld on the withdrawal will be 20% * $100,000 = $20,000. He therefore receives $200,000 - $20,000 = $180,000.

The withholding tax however does not represent the final tax payable on the withdrawal. If the SPRs and foreigners are Singapore tax residents, the actual tax payable on their SRS withdrawals will be based on the graduated personal income tax rates ranging from 0%-20% (YA2007 onwards). If the SPRs and foreigners are not Singapore tax residents, the actual tax payable on their SRS withdrawals will be 15% or based on the graduated personal income tax rates, whichever is higher. The tax withheld on the withdrawal is a tax credit which a taxpayer can use to offset his actual tax liability; any unused tax credit will be refunded to the taxpayer.

To illustrate, suppose that in the above example, the actual tax rate applicable for the SRS withdrawal is finally determined to be 15%. The actual tax payable on the SRS withdrawal (of $200,000) will be 15%*$100,000= $15,000. Assume also that the SRS member has no other tax liability. The Inland Revenue Authority of Singapore (IRAS) will therefore refund $5,000 (which is $20,000 - $15,000) to him.

The SRS operator is also required to deduct a 5% penalty on premature withdrawals. The 5% penalty is non-refundable and should not be confused with the withholding tax.

I am thinking of withdrawing all my SRS monies. After making a full withdrawal, can I open a new account and make new contributions again?

If your withdrawals are made either at or after the prescribed retirement age* or on medical grounds, you will not be able to open a new account to contribute again.
Otherwise, you may open a subsequent SRS account with any SRS operator. The date of first SRS contribution, if it is relevant in deciding your qualification for any SRS concession, will be the date of first contribution to your new account and NOT the date of first contribution to your previous account.

(* The statutory retirement age that was prevailing when you made your first SRS contribution.)

I am a foreigner. What happens to my SRS deposits when I leave Singapore?

Any cash proceeds from the maturity of any SRS investments/deposits will be retained in the SRS account. You may withdraw your SRS monies anytime. You may also continue to operate your SRS account after leaving Singapore.

As for the taxability of the SRS withdrawals, all withdrawals are generally taxable. In addition, all withdrawals made before the retirement age (currently 62) attract a 5% penalty.

As a concession, the 5% penalty is waived for foreigners who withdraw their SRS monies entirely in one lump sum after maintaining their SRS accounts for at least 10 years. The SRS operators will be withholding tax (and the 5% penalty if applicable) on withdrawals made by non-Singaporeans.

I am a Singapore PR now. If I cancel my PR status before I reach the statutory retirement age, when can I withdraw my SRS funds without penalty?

Currently all SRS account holders, regardless of their nationality, can withdraw their SRS monies penalty-free if they:

Only 50% of the withdrawal is subject to tax under the above circumstances.

Once you have cancelled your PR status (and have not applied for Singapore citizenship), you would qualify for an additional concession (penalty free withdrawal). This concession is available to foreigners who withdraw their SRS monies entirely in one withdrawal transaction. The conditions for this concession are as follows:

Similarly, only 50% of the withdrawal is subject to tax.

Would the authorities consider waiving the tax on withdrawal completely and raising penalties for early withdrawal instead? This may encourage even non-taxpayers, who already do not benefit from tax deductions, to make SRS contributions.

People who do not pay tax today (i.e. the lower income earners) are unlikely to pay tax on their SRS withdrawals. This is because of the significant effective tax exemption on much of their SRS withdrawals, as elaborated below.

With effect from Year of Assessment 2003, all taxpayers are not subject to tax on their first $20,000 of income (zero tax rate income band). Retirees not only enjoy this tax exemption for their SRS withdrawals, they also enjoy a further 50% tax concession on their SRS withdrawals, that is, only 50% of SRS withdrawal is subject to tax. The result is that a retiree is taxed only on the amount of SRS withdrawals exceeding $40,000, (assuming that he has no other sources of income).

To illustrate, consider a retiree making an SRS withdrawal of $50,000. As a result of the 50% tax concession, only $25,000 is subject to tax. However due to the zero tax rate for the first $20,000 of income, the retiree is actually subject to tax on only $5,000 of SRS withdrawal. Non-taxpayers should therefore not be deterred from making SRS contributions by the tax on withdrawals. Over a 10 year withdrawal period, a retiree can withdraw $400,000 from SRS tax free (assuming that there is no further change to marginal tax rates).

If a foreigner who has held her SRS account for 7 years is leaving Singapore, can she opt to leave the account alone for 3 more years, so as to take advantage of the 50% tax deduction benefit and also get around the withdrawal penalty?

Yes, she may; she would enjoy the 50% tax deduction benefit if she withdraws all funds in her SRS account at least 10 years after the date of her first SRS contribution. Please note that she should also have been a foreigner for at least 10 years since her first SRS contribution, to qualify for this benefit.