It’s the ‘SRS rush’ season once again. You have just about 3 weeks left to contribute to your Supplementary Retirement Scheme (SRS) and enjoy tax relief for 2025. If you have not done so, it takes only a few minutes to transfer the money to your SRS account. This small but timely action could translate into meaningful tax savings and a stronger retirement future for yourself.

What is Supplementary Retirement Scheme (SRS)?

The SRS is a voluntary savings programme introduced by the Singapore government on 1 April 2001. It is meant to complement the compulsory savings under Central Provident Fund (CPF). While CPF covers housing, healthcare and basic retirement needs, SRS gives you the flexibility to save extra for retirement and decide how much and when to contribute. 

Participation in SRS is entirely optional, and you may use your contributions to invest in a wide range of approved financial instruments if you wish. 

Why Contribute to SRS: Tax Relief & Retirement Savings

1. Lower Taxable Income

Every dollar you contribute to SRS reduces your taxable income by the same amount, subject to a cap on personal income tax relief of $80,000 per year. Your SRS contributions count, on top of any CPF top-ups or other tax reliefs. 

2. Tax-free Growth Before Withdrawal
   Investment returns earned through the SRS are tax-free (except Singapore dividends received) until withdrawal. You will pay tax on only 50% of the amount withdrawn upon retirement. 
3. Preferential Tax Treatment on Withdrawals
   
   

Once you reach retirement age, only 50% of your withdrawals will be taxable. Plus, you can spread your withdrawals over up to 10 years, smoothing out tax payments and possibly reducing overall tax liability. 

Note: The retirement age is the statutory retirement age that was applicable when you made your first SRS contribution

Who Can Contribute to SRS and Contribution Limits

Eligible individuals include Singapore Citizens, Singapore Permanent Residents (PRs), and foreigners living or working in Singapore – as long as they are at least 18 years old, not an undischarged bankrupt, and mentally capable of managing their affairs.

Contribution caps as of 2025:

• Citizens/PRs: Up to S$15,300 per year
• Foreigners: Up to S$35,700 per year (if nationality status and declaration criteria are met) 

Only cash contributions are allowed. Either you or your employer (acting on your behalf) can contribute, but note employer contributions are treated as taxable income for you, even though they still qualify for the SRS relief. 

Each person may hold only one SRS account at a time (with one of the authorised banks – DBS, OCBC, UOB). 

How to Contribute and When to Do So

You can add funds to your SRS account any time during the year, as long as you do not exceed the annual cap. Contributions must be made before the cut-off date (usually 31 December) to qualify for tax relief for that year of assessment.

Once you begin withdrawing from your SRS account (typically after retirement), or if you withdraw early on medical grounds, you can no longer contribute additional amounts. 

Withdrawing from SRS – What You Should Know

SRS funds are not locked – you may withdraw anytime but subject to terms and conditions.

• Withdrawals can be made in cash or in the form of investments (effective 1 Jul 2015). The catch is that if you withdraw your SRS before the statutory retirement age (currently at 63), there will be a 5% penalty.

• In addition, when you withdraw money or investment from your SRS Account, the withdrawal is subject to tax.

• The taxable amount of the withdrawal will be added to your other taxable income (e.g. employment, rental) and taxed based on the prevailing tax rate. The time of withdrawal and the circumstances determine the taxable amount of the withdrawal.
  

• Withdrawal Taxation & Penalties:
  You can take cash, or withdraw as investments/annuities. In many cases, you may spread withdrawals over 10 years which helps minimise tax impact.
  • Early Withdrawals (before retirement age): 100% of the withdrawal amount is taxable, plus a 5% penalty.
  • Withdrawals After Retirement: 50% is taxable, and there is no penalty.
  • Withdrawals via Annuities – 50% of the annual annuity payouts will be taxed once the SRS account is closed or deemed closed (i.e., at the end of the 10-year withdrawal window).
  • Withdrawals Upon Death – 50% of the amount treated as withdrawn (“deemed withdrawal”) is taxable.
  • Withdrawals on Medical Grounds – 50% of the amount withdrawn is taxable.
  • Withdrawals Due to Bankruptcy – 100% of the withdrawn amount is taxable.
  • Lump-Sum Withdrawal by a Foreigner (after 10-year holding period) – 50% of the full withdrawal is taxable, and no early withdrawal penalty applies.

Depending on your withdrawal strategy and overall income at the time, SRS may help you pay significantly less tax overall than a lump-sum withdrawal would. 

Investing Your SRS – Don’t Let It Sit Idle!

Any cash left idle in your SRS account earns a very low interest rate (around 0.05% p.a.), which may not even keep up with inflation. 

To make the most out of SRS, you can invest in a variety of approved instruments, such as: bonds, unit trusts / mutual funds, ETFs, stocks, insurance-linked plans, etc. Investing your SRS is a smart move, especially if your retirement horizon is several years or even decades away. 

How do you maximise the value of your SRS contribution?

Before committing to the SRS, take a moment to weigh the costs and benefits. Consider the tax savings you stand to gain and the potential investment returns on your SRS funds, and compare these with the downside of having your money locked in until retirement age.

Keep in mind that if you withdraw all your SRS savings at once upon retirement, the tax payable could outweigh the initial tax benefits. A more strategic approach is to spread your withdrawals over 10 years, which can help keep your taxable income lower and preserve more of your gains.

Use SRS as part of a broader retirement plan

Because SRS is voluntary and flexible, it works best when integrated with CPF, other investments, and your overall long-term financial goals.

If you would like professional guidance on how to optimise or invest your SRS, simply reach out to me at +65 6252 8500 or book a consultation at https://karentang.sg/consultation/

Make full use of the remaining days of 2025 and start your new year financially stronger. If you have not done a financial review this year, l can help to give you greater clarity on your financial future.  

Wishing you abundance, good health, and growth in the year ahead!