Enhancements to the Supplementary Retirement Scheme10 Mar 2008
1. The Supplementary Retirement Scheme (SRS) will be enhanced to encourage Singaporeans to voluntarily put aside more savings for retirement. As announced by the Minister for Finance in his Budget 2008 Statement, the following changes will be made to the SRS with effect from 1 October 2008:
a. To encourage employers to play a larger role in building up the retirement savings of their employees, employers will be allowed to directly contribute to the SRS accounts of their employees and enjoy full tax deduction on their contributions. Today, only employees are allowed to contribute to the SRS. This change will provide an inexpensive method for employers to provide retirement benefits without the need to set up company pension funds.
b. To better support Singaporeans who are working beyond the retirement age, MOF will remove the age limit within which members can make contributions to their SRS accounts. Members will be able to contribute beyond the statutory retirement age of 62, until they make a penalty-free withdrawal. Their 10-year withdrawal period will begin when they make the first withdrawal. Today, SRS members can contribute only up to age 62, and their 10-year withdrawal period will begin from age 62, regardless whether they make a penalty-free withdrawal at age 62.
c. MOF will allow individuals without any earned employment income in the previous year to contribute to the SRS in the current year. Today, this is not allowed.
2. For members who are aged 62 or above on 1 October 2008, MOF will provide a one-off transitional concession so that they can take advantage of the new rules.
a. Those who have made penalty-free withdrawals and/or closed their accounts before 1 October 2008, but wish to continue to contribute to the SRS, may do so as long as they make a new SRS contribution between 1 October 08 and 31 December 2008. They can withdraw their SRS monies anytime thereafter, but they will no longer be able to contribute again after the first penalty-free withdrawal, when their 10-year withdrawal period will begin.
b. For those who do not wish to start contributing again or have not begun withdrawals, the new rules will automatically apply and their 10-year withdrawal period will begin when they make their first penalty-free withdrawal.
3. Contributions to the SRS will continue to be subject to the annual cap of $11,475 for Singapore Citizens and Permanent Residents, $26,775 for foreigners.
4. The SRS complements the Central Provident Fund (CPF) and allows Singaporeans as well as foreigners to save for retirement in a flexible manner. The scheme offers attractive tax benefits ? contributions to the SRS are eligible for tax relief and only 50% of the withdrawals from the SRS are taxable at retirement.
5. With the enhancements to the SRS as well as growing awareness of the need to save up for financial security in retirement, MOF expects take-up of the SRS to continue to grow. Since the inception of the scheme in 2001, the number of SRS accounts has grown to over 41,000 in 2007. Cumulative contributions have also reached $1.44 billion, with annual growth rates of 25% on average across the last 3 years.
6. For more details, please refer to the MOF SRS website.
MINISTRY OF FINANCE