CPF
What is Supplementary Retirement Scheme (SRS)?
A voluntary savings scheme that gives you a dollar-for-dollar tax relief on what you put in. The money can be invested, and from the statutory retirement age withdrawals are spread out with only 50% taxed. Withdraw early and you pay tax on the full sum plus a 5% penalty.
The tax deal
Money you put into the Supplementary Retirement Scheme is deducted from your taxable income, up to $15,300 a year for Singapore Citizens and PRs (or $35,700 for foreigners). You can invest the funds in shares, funds, bonds and fixed deposits, and when you withdraw from the statutory retirement age only 50% of each withdrawal is taxed — and you can spread withdrawals over up to 10 years to keep each year’s taxable slice small.
The catch
Withdraw before the retirement age and the full amount is taxable, plus a 5% penalty. Idle SRS cash earns almost nothing (around 0.05%), so the scheme rewards those who actually invest the money. SRS works best if you expect a lower tax rate in retirement than today — the relief saves tax at your current marginal rate, while withdrawals are taxed later at (hopefully) a lower one.