Supplementary Retirement Scheme

Supplementary Retirement Scheme (SRS) was introducedin April 2001. It is a voluntary participation to help to address the financial needs in the golden years.

Advantages:
1) Contributions to SRS are eligible for tax reliefand only 50% of the withdrawals from SRS are taxable at retirement.
2) The withdrawal period can be spread into a periodof 10 years.
3) Each adult should have at least 25 active working years. If he contributes $10000 per year (current cap is $11475 per year), when he retires.
4) The money placed in SRS account can be used to purchase single premium insurance policies, various unit trusts and shares.
5) If the money is SRS is invest in a low-cost globally diversified portfolio, getting a return of 4-5% pa should not be a big problem. So at retirement,a neat retirement nest egg is ready.
6) Since contributions to SRS are eligible for tax relief, some money is saved and can be put into better usage, possibly various investment tools to generate better returns.

Disadvantages:
1) The contributions to SRS is "locked" up. Unlike CPF, the money in SRS can still be withdraw under certain conditions.
2) If one contributes $10000 per year, the amount of money needs to be set aside is about $833 per month.
3) Unlike CPF monies which the government guarantees arisk-free interest rate of min 2.5%pa, investment returns from SRS is not guaranteed.

My Comments:
Growing old without health and wealth is definitely adouble whammy. During our active working years, besides maintaining good health, saving enough for oldage is equally important too. We CANNOT rely totally on our CPF because the bulk has been used to pay our flat and possibly children's tertiary education fees. SRS helps us to build a retirement nest egg.

For more info, please refer to www.mof.gov.sg