The Supplementary Retirement Scheme (SRS) is part of the Singapore government’s multi-pronged strategy to address the retirement needs of people in Singapore. This not only include Singaporeans and Permanent Residents (PRs), but also foreigners who are working in Singapore.
Unlike the CPF scheme which is compulsory and only applicable to Singaporeans and PRs, the Supplementary Retirement Scheme (SRS) is available to all foreigners who are working in Singapore.
You need to open an SRS account with one of the three local banks (DBS, OCBC, UOB) in Singapore. To do so, you need to meet the following eligibility criteria:
– Be at least 18 years old;
– Not be an undischarged bankrupt; and
– Are not mentally disordered and are capable of managing yourself and your affairs.
Why Use The SRS Account?
Foreigners who are working in Singapore do not receive CPF contributions. This means unlike Singapore citizens and PRs, they do not participate in any retirement planning schemes.
The SRS is one plan that they can choose to participate in. By contributing to their SRS account, they are able to enjoy tax relief, up to a maximum personal income tax relief of $80,000 per year.
To put it simply, topping up your SRS account only makes sense if you are paying income tax. If you are not paying any income tax, after accounting for tax relief, then there is no reason to contribute to your SRS account for the year.
How Much Can I Contribute To My SRS Account As A Foreigner?
Because they do not receive CPF contribution, foreigners who are working in Singapore are allowed to contribute a higher amount to their SRS account each year as compared to Singaporeans and PRs. This works out to be $35,700 for foreigners and $15,300 per annum for locals and PRs.
It’s important to note that you can only contribute to your SRS account if you have earned some form of income for the year.
How Much Tax Saving Can I Enjoy When I Contribute To My SRS Account?
How much you save for every dollar that you contribute to your SRS account depends on the personal income tax rate that you are currently paying.
At the highest tax bracket (in excess of $320,000), tax rates are at 22%. This means that for every $10,000 that you contribute to your SRS account, you will save $2,200 in income tax.
At the lowest tax bracket (above $20,000 but below $30,000), tax rates are at 2%. This means that for a contribution of $1,000 to your SRS account, you will save $20 in income tax.
SRS Withdrawal Rules & Limits
There are withdrawal rules for SRS that foreigners need to be aware of.
Broadly speaking, before you even start contributing to your SRS account, there are three kinds of SRS withdrawal rules that you need to be aware of.
# 1 Standard Withdrawal Rules Which Apply To All SRS Account Holders – Local & Foreigners
Withdrawal of funds after retirement age (current age 62): At age 62, you can start making penalty-free withdrawal from your SRS account. When you withdraw your SRS funds after reaching the retirement age, you will only be taxed 50% of the amount you withdraw for the calendar year. From the time the first withdrawal is made, you have a period of up to 10 years to make your withdrawal.
Withdrawal of funds before retirement age:Y can make withdrawal from your SRS account at any time that you want. However, you will be subjected to a penalty of 5% of the amount withdrawn if you make the withdrawal before the statutory retirement age for when your first contribution is made (currently 62). In addition, the full amount withdrawn will also be subject to income tax.
# 2 Withdrawal Made Due To Special Circumstances – Locals & Foreigners
There are special circumstance when the 5% penalty for premature withdrawal will not apply.
– Death, you will also be taxed 50% of the withdrawal amount
– Medical grounds, you will also be taxed 50% of the withdrawal amount
– Bankruptcy, you will also be taxed 100% of the withdrawal amount
# 3 Withdrawal Made By Foreigners
If you are a foreigner (i.e non-Singaporean, non-PR), you can withdraw your SRS monies without the 5% penalty if you meet the following criteria:
– You are neither a Singapore Citizen nor a SPR on the date of withdrawal and for a continuous period of 10 years preceding the date of withdrawal;
– You have maintained your SRS account for a period of at least 10 years from the date of your first contribution to your SRS account; and
– You make a one-time full withdrawal from your SRS account.
For such withdrawal, you will be taxed 50% of the withdrawal amount. Remember, you need to make a full and not partial withdrawal.
It’s important to note that once you have withdrawn from your SRS account, whether partially or the full amount, you will no longer be able to make future SRS contributions.
If you do not meet the following criteria above, you can still withdraw your SRS monies but you will be taxed at 100% for the full amount withdrawn, in additional to the 5% penalty for premature withdrawal.
Do note as well that if you are a foreigner who is no longer working in Singapore, you will be taxed at the non-resident tax rate. Non-resident tax rate in Singapore is currently at 15%.
Here are some examples to consider.
Scenario A: Foreigner, age 55, who have worked in Singapore for the past 20 years has returned back to his home country. Since opening his SRS account 15 years ago, he has $100,000 in his SRS account. He makes a one-time full withdrawal of $100,000.
Because he has 1) maintained his SRS account for more than 10 years, 2) is not a Singapore citizen or PR on the date of withdrawal and for a continuous period of 10 years preceding the date of withdrawal, he qualifies for the foreigner withdrawal exemption.
5% premature withdrawal penalty – Not applicable
15% tax at non-resident tax rate (since he is no longer staying in Singapore) – $15,000
Scenario B: Foreigner, age 35, who have worked in Singapore for 5 years have intention to return back to her home country soon. She has accumulated $30,000 in her SRS account since opening it 5 years ago. She makes a one-time withdrawal of $30,000.
In this scenario, she will be taxed a 5% premature withdrawal penalty since she has only maintained her SRS account for 5 years. This means she will be taxed $1,500 while 100% of her withdrawal amount – $30,000 – which will be added to her employment income for the year and subject to tax.
If she wants to avoid the 5% premature withdrawal penalty, she needs to maintain her account for a further 5 years (10 years in total). In this case, she would then avoid the 5% penalty and be taxed only 50% of her withdrawal amount – $15,000.
Of course, to qualify for that, she can’t be a Singapore citizen or PR in the next 5 years. If she has returned back to her home country by then, she will also be taxed the 15% non-resident tax rate (since she is no longer staying in Singapore).
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