Your horizon years in Singapore should be serene and financially secure. Most expats based in Singapore would have heard about the more popular Central Provident Fund (CPF), but there’s another voluntary scheme that also works hard to protect working Singapore citizens and Permanent Residents (PR) in their retirement years. It’s known as the Supplementary Retirement Scheme (SRS).
Let’s take a look at how these two main schemes make a solid pension duet, shall we?
Central Provident Fund (CPF)
The Central Provident Fund (CPF) is a comprehensive social security system that enables working Singapore Citizens and Permanent Residents (PR) to set aside funds for retirement. CPF savings are meant to provide for housing and medical needs and for basic living needs after retirement. Both employer and employees make monthly CPF contributions. These contributions go into the following accounts:
Supplementary Retirement Scheme (SRS)
The Supplementary Retirement Scheme (SRS) is a voluntary scheme for all tax-payers in Singapore to save for retirement over and above CPF, allowing for a tax relief in the year of contribution. The SRS is available to self-employed or salaried income earners and contribution rates are more generously allocated to foreigners.
SRS is a good first step to build-up pension funds for self-employed expats in Singapore. The SRS contributions may be used to purchase various investment instruments. Investments in for instance unit trusts, ETF, shares, bonds are permissible and even for the exercise of company stock options.
Withdrawal of your SRS funds from the age of 62 is taxable for only 50% of the withdrawal amount. Early withdrawals attract a penalty of 5% and are in general fully taxable. Premature withdrawals are not subject to the 5% penalty in the case of death, medical grounds, bankruptcy and full withdrawals by foreigners provided the SRS account has been maintained for 10 years or more.
For instance: if you have held an SRS account for 7 years and leave Singapore, and maintain the SRS account for 3 more years you can take advantage of the 50% tax concession and not be subject to the withdrawal penalty. The SRS scheme is a flexible and a fully investable scheme available to tax residents in Singapore, providing a tax relief and potential 50% tax concession on withdrawals. The added ability to spread out withdrawals enhances your tax planning possibilities.
Be Doubly Sure; Safeguard Your Future Today
While the CPF is well communicated and known to many, the SRS at times is overlooked. Together, they join forces to make up a pretty good pension duet, giving established working expats and permanent residents in Singapore the peace of mind to look forward to a financially secure future abroad.
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