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SRS for retirement
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Agenda• Facts about SRS• Understanding SRS• Tax Relief Schemes (CPF (SA) vs.
SRS)• Retirement solution with SRS• Case Study
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Facts about Supplementary
Retirement Scheme (SRS)
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Understanding SRSStraits Times, 1 Nov 2015
Source: http://www.straitstimes.com/business/invest/get-tax-relief-while-building-your-nest-egg
105,483
As of Dec 2014, there is a only a total of 105,483 SRS
members since 2001
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Understanding SRSStatistics
Source: http://www.straitstimes.com/business/invest/get-tax-relief-while-building-your-nest-egg
34%
34% of SRS funds are left idle in cash as of Dec 2014
worth $1.66 Billion
$5Billion
Total asset under SRS as of Dec 2014
65%
65% are below age of 55.31% are 36-45 years old34% are 45-55 years old
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Understanding SRSHow it works
Source: http://www.mof.gov.sg/MOF-For/Individuals/Supplementary-Retirement-Scheme-SRS
Voluntary contribution via cash
Tax relief scheme subject to annual cap
Personal Relief Personal Relief
Taxable Income
SRS contribution
Taxable Income
Contributions may be used to purchase various investment instruments.*
*SRS resource:http://www.mof.gov.sg/Portals/0/MOF%20For/Individuals/SRS/SRS%20Booklet_summarised.pdf
Premature withdrawal penalty at 5%
Without SRS With SRS
Premature withdrawal not applicable for1) death; 2) medical grounds; 3) bankruptcy; 4) the full withdrawal of the SRS balance by a
foreigner who has maintained his SRS account for at least 10 years from the date of his first contribution.
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Understanding SRSHow it works
Source: http://www.mof.gov.sg/Portals/0/MOF%20For/Individuals/SRS/SRS%20Booklet_summarised.pdfhttp://www.mof.gov.sg/Portals/0/MOF%20For/Individuals/SRS/SRS%20Booklet_summarised.pdf
Only 50% of withdrawal amount is taxable
Withdraw up to $40,000 per year if you want to remain tax free
first $20,000 of chargeable income is 0% from YA 2003
Flexible to withdraw any amount up to 10 years from age 62
If there is any balance at end of 10 year withdrawal period, 50% of amount will be subject to tax
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Understanding SRSHow it works
Source https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Special-tax-schemes/Supplementary-Retirement-Scheme--SRS-/SRS-contributions/
*Withdrawal can only be done:At or after reaching the statutory retirement age OR medical ground
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Understanding SRS
Source: http://www.straitstimes.com/business/invest/get-tax-relief-while-building-your-nest-egg
SRS contribution of Singaporean/SPR To increase to $15,300 for 2016 from $12,750
SRS contribution of Foreigner To increase to $35,700 for 2016 from $29,750
To calculate contribution amount
17 months X $85,000 (base salary)
Every $ contributed will be net off chargeable income for the year of assessment.
SRS account can only opened by local banks
Tax Relief Schemes
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• CPF Special Account (SA) vs. SRS
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CPF Special Account (SA) vs. SRSTax Relief Schemes
Source: https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-withdrawals-at-55-years-oldhttp://business.asiaone.com/news/personal-finance/cpf-sa-vs-srs-which-better
SRS CPF (SA)
Withdrawal for 10 years starting @ age 62 Draw down from CPF Life @ age from 65 to 70
Tax relief up to $15,300* Tax relief up t o $7,000
0.05% interest rate 4% as floor interest*
Withdrawal due to medical or early withdrawal at a 5% penalty Withdrawal at age 55 up to $5,000*#
No capped on the amount in account Capped at $161,000* of FRS
Flexibility to invest Limited
Targeted for those with tax bracket of 7%Annual income of $80,000*
Voluntary contribution for self / spouse/parents
Deferment scheme, with withdrawal subject to prevailing tax rate
50% of annuity payout subject to tax
Withdrawal up to $40,000 per annum with 50% subject to tax (1st $20,000 income is at 0% from YA2003)
*As of year 2016# For members who turned 55 from 2013, you also have the option to withdraw up to 20% of your Retirement Account savings from 65 years old (includes the first $5,000 you could withdraw at 55).
• Case Study
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How much will you save?
SRS Scheme
Mr. Yeo , SingaporeanAge 45, Annual Income $100,000
Chargeable Income YA 2016
Income Tax rate YA 2016
Gross Tax payable
First $80,000Next $40,000
-11.5%
$3,350$4,600
Source: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Income-Tax-Rates/
Without SRS With SRS
Annual Income $100,000 $100,000
Personal Relief $10,000 $10,000
SRS N.A $15,300
Chargeable Income $90,000 $74,000
Tax Payable $4,500 $2,930*
Tax Saving $1,570
*Mr. Yeo has effective dropped his taxable income to 7% tax bracket