SRS (Supplementary Retirement Scheme)

SRS is one of my 3 main modes for savings and increasing my retirement funds as described here.

Important features of SRS:
- Amount contributed yearly to SRS will be eligible for tax relief.
- Maximum annual contribution is S$11475.
- Funds in SRS account could be used for Fixed Deposit, Single Premium insurance products (such as endowment, annuity), bonds, unit trusts and stocks (except for direct property purchase).
- Investment proceeds are returned to the SRS account.
- Funds in SRS could only be withdrawn upon reaching the statutory retirement age prevailing at the time of one's first contribution. Premature withdrawal will incur 5% penalty fees (unless on death, medical grounds or bankruptcy).
- Only 50% of the withdrawals from SRS are taxable at retirement. Amount withdrawn in a year will be considered as part of income for that year and thus, the income tax rates will depend on the total taxable income for that year. For premature withdrawals, 100% of the amount withdrawn will be taxable (50% for withdrawals on death, medical grounds or bankruptcy).
- Withdrawals on or after, the statutory retirement age prevailing at the time of one's first contribution, could be spread over a maximum of 10 years. This could further reduce the taxes to be paid.

All these seemed attractive to me as I could save on current taxes and yet can invest the contributions too. Thus, I targetted to contribute S$5000 annually to SRS since year 2007.

I purchased stocks using the available funds in my SRS account since 2008 and have satisfactory returns in the past 3 years. More details will be in my year end review of my SRS funds.

Last day of contribution to SRS will be 31 Dec to be eligible for tax relief for YA2011.

More details at Ministry of Finance website.