Supplementary Retirement Scheme (SRS): How It Works, Withdrawals and What Happens When You Die

May 20, 2022

10 min read

Updated: Oct 6

The Supplementary Retirement Scheme (SRS) is a voluntary scheme that lets you save for retirement on top of your CPF, in exchange for tax relief today. You can contribute up to $15,300 a year as a Singapore Citizen or Permanent Resident, or $35,700 as a foreigner. Once you reach the retirement age locked in at your first contribution, withdrawals are penalty-free and, in most cases, only half of each withdrawal is taxed.

One rule surprises many families: unlike CPF, SRS cannot be nominated. It becomes part of your estate and passes under your Will, or under intestacy law if there is no Will.

This guide covers how SRS works, when you can withdraw, how withdrawals are taxed, and what happens to your SRS when you die. It is Part 6 of our CPF, CPF LIFE, SRS & Inheritance series.

What is the Supplementary Retirement Scheme (SRS)?

SRS is a scheme run under the Ministry of Finance (MOF) that encourages you to save for retirement over and above your CPF savings. Every dollar you contribute, up to the annual cap, reduces your taxable income for that year. SRS is tax-deferred, not tax-free, and you pay tax on half of what you take out later.

Cash left uninvested in your SRS account earns just 0.05% a year, so most people invest it. SRS money can go into shares, unit trusts, bonds, fixed deposits, exchange-traded funds and some insurance products.

You open an SRS account with an SRS operator (DBS/POSB, OCBC or UOB) and you can hold only one SRS account at a time.

What is the difference between CPF and SRS?

CPF is built from monthly contributions by working Citizens and PRs and their employers, and CPF withdrawals and CPF LIFE payouts are not taxed. CPF savings also earn guaranteed interest. Your first $60,000 earns a little extra, bringing the total to as much as 5% a year if you are below 55 years old, and 6% from 55.

SRS is voluntary and tax-deferred, and its cash earns far less. The two also pass to your family in completely different ways, and that is the difference most people miss.

CPF is a tax-exempt scheme (you don't need to pay tax) whereas SRS is a tax deferral scheme (you pay tax later).
Most parts of CPF are protected from creditors while your SRS account is not.
Interest rate on SRS is lower compared to CPF saving rates.

Note that CPF savings are locked up for a long period whereas you can withdraw your SRS anytime (subject to penalty and restrictions) and thus, with greater liquidity, you should expect a lower interest rate on SRS.

If you want to understand how CPF passes on, Part 1 of this series covers CPF nominations in detail.

Who can open an SRS account, and how much can you put in?

Singapore Citizens (SC), Permanent Residents (PR) and foreigners can make SRS contributions as long as you are:

At least 18 years old;
Not an undischarged bankrupt;
Not having a mental disorder; and
Capable of managing yourself and your affairs

You can contribute any amount, as often as you like, up to the cap. Contributions made by 31 December reduce the tax on that year's income, which is assessed in the following Year of Assessment. Your SRS relief sits within the overall $80,000 cap on personal income tax reliefs, so if you already claim for other reliefs, check how much room is left.

Note:

You can only have 1 SRS account at any point in time
You can change your SRS operator
All proceeds from the sale of your SRS investment instruments must be returned to your SRS account.

When can you withdraw from SRS without a penalty?

You can withdraw from SRS at any time, but withdrawals are penalty-free only from the statutory retirement age in force when you made your first SRS contribution. Later changes to the retirement age do not affect you.

What if you withdraw your SRS before your retirement age?

Withdrawing before your SRS retirement age usually costs you twice: the full amount is taxed, and there is a 5% penalty on top.

100% of the withdrawal is subject to income tax; and
A 5% penalty applies (see the exceptions below).

If you contribute and withdraw in the same year, the order matters:

Contribute $10,000, then withdraw $8,000: no tax or penalty on the $8,000, and tax relief only on the $2,000 net contribution.
Contribute $10,000, then withdraw $15,000: no SRS tax relief. The $5,000 net withdrawal is taxed and also attracts the 5% penalty.
Withdraw $15,000, then contribute $10,000: the full $15,000 is taxed and attracts the 5% penalty, but you still get $10,000 of tax relief.

There is no 5% penalty in these situations :

Death, or full withdrawal because of terminal illness: up to $400,000 is exempt from tax, and 50% of anything above that is taxed. The exemption is lower if you have already made penalty-free withdrawals.
Medical grounds (physical or mental incapacity, or a partial withdrawal because of terminal illness): 50% of the withdrawal is taxed.
Bankruptcy: 100% of the withdrawal is taxed.
Full withdrawal by a foreigner: 50% is taxed if the account has been held for at least 10 years. Otherwise, 100% is taxed and the 5% penalty applies.

How are SRS withdrawals taxed after retirement age?

From your SRS retirement age, there is no 5% penalty and only 50% of each withdrawal is taxed.

The 10-year withdrawal period starts from your first penalty-free withdrawal, which can be any time on or after your SRS retirement age.
There is no annual limit on how much you withdraw. The taxable half is added to your other income that year and taxed the following year. Your SRS operator reports it to IRAS, so you do not need to declare it.
Spreading withdrawals usually means less tax. With no other income, you can withdraw up to $40,000 a year, or $400,000 over the 10 years, tax-free.
At the end of the 10 years, any balance in your SRS account (except life annuities) is deemed withdrawn immediately. Your SRS operator reports 50% of it to IRAS, and it is taxed the following year.
After the deemed withdrawal, you can withdraw the balance or leave it with your SRS operator. Future returns are taxed like any other investment.
Once you have withdrawn everything and closed your account, on medical grounds or after reaching your retirement age, you cannot open a new SRS account.

Note:

Insurance policies

If you have insurance policies (e.g. endowment policies and term annuities), you do not need to surrender your policies. The value of the policies (i.e. based on the surrender values determined by the insurance companies) will be added to your SRS balance and deemed withdrawn.

Life annuities

For investments in life annuities, the 10-year withdrawal period does not apply. Before the SRS account is closed or deemed to be closed, annuity payments will be made to the SRS account and will not be taxed if no SRS withdrawal is made. After the SRS account is closed or deemed closed, 50% of the annuity payments will be subject to tax each year perpetually.

What happens to my SRS if I die or am terminally ill?

If you pass away, your SRS is deemed as fully withdrawn on the date of death and be passed on to your estate and distributed as per your Will or intestacy law.

Unlike CPF, you cannot nominate your SRS. Your SRS will form part of your estate.
SRS bank operators may require the executor/administrator to produce the Grant of Probate/Grant of Letters of Administration before allowing for transfer to ensure the assets in SRS are distributed correctly.

If you are terminally ill, you can withdraw your SRS in full.

In both cases, there's no early withdrawal penalty and the tax treatment is the same - Up to $400,000 is exempt, and 50% of the amount above the exemption is taxed.

Here are some examples to illustrate.

Scenario 1: No prior withdrawal.

J has $450,000 in SRS. J dies.
Tax exemption amount = 10* S$40,000 = S$400,000
Taxable amount = 50% of $50,000 ($450,000-$400,000) = $25,000

Scenario 2: 1 prior withdrawal

J has $450,000 in SRS.
J withdrew $30,000 in Year 1. S$15,000 (50%*S$30,000) is subject to tax.
J dies, or applies for a full withdrawal in Year 2.
Adjusted tax exemption amount = 9*S$40,000 = S$360,000
Taxable amount in Year 2 = 50% of (S$420,000 - S$360,000) = 50% of S$60,000 = S$30,000

Scenario 3: Started prior withdrawal but didn't withdraw every year

J has $450,000 in SRS
J withdrew S$40,000 in Year 1, when J turned 62 years old (ie, no penalty withdrawal)
J didn't make withdrawal in Year 2 as J had part-time income
J dies in Year 3
Adjusted tax exemption amount = 8*S$40,000 = S$320,000
Taxable amount in Year 3 = 50% of (S$410,000 - S$320,000) = 50% of S$90,000 = S$45,000

How will your family find and claim your SRS?

Your executor, or your administrator if there is no Will, claims your SRS from your SRS operator bank. The bank will generally ask for a Grant of Probate or Letters of Administration first.

But before any of that can happen, your family has to know three things: that your SRS account exists, which bank operates it, and what it is invested in. Your CPF passes by CPF nomination, and your Dependants' Protection Scheme payout follows its own DPS nomination. Your SRS has no nominee, so it relies entirely on your executor finding it.

Three things make that much easier for your family:

Write down what you own and where it is.
A schedule of assets is a simple list of everything you own, such as your bank accounts, CPF, SRS, property, insurance and investments, with the institution that holds each one. Without it, your executor has to piece your finances together from old statements and letters. For your SRS, note the operator bank and the account.
Name an executor and make sure they know.
Your executor is named in your Will, but many people never tell the person they have chosen. A short conversation now spares them from finding out at a much harder time.
Make sure your executor can get to your records.
A list nobody can find does not help. Keep your schedule of assets, the location of your Will and your executor's details together, and make sure your executor can access them.

Immortalize, a Singapore platform for planning later life and what you leave behind, lets you do all three in one place. Your Schedule of Assets keeps a record of everything you own, and Immortalize's Connections [https://marketplace.immortalize.io/dashboard_connections] lets you give the right people, such as your executor, access to the information they need. When the time comes, they will know exactly where to look.

Is it better to withdraw SRS after statutory retirement age or keep it?

The decision to withdraw now or later requires weighing the tradeoff between:

Postponing potential tax on your SRS till later; and
Accumulating investment returns within SRS and subjecting those returns, which would otherwise not be taxable, to potential future tax.

Here are examples to explain.

(Disclaimer: Nothing in this article or site should be construed as providing legal advice, tax advice, financial advice or advice of any sort. The information provided is general in nature, opinions of the writer and may become inaccurate over time. Please consult a professional for advice.)

When withdrawing LATER may make sense

If you have other taxable income now and don't need the money from your SRS, it may make sense to postpone the withdrawal to ensure you pay the least amount of tax on your SRS since 50% of withdrawals after statutory retirement age are taxable.

You may want to consider waiting till you have little or no other taxable income to withdraw your SRS to fully utilize the income tax-free thresholds.

Note: In Singapore, the first $20,000 of chargeable income (income after reliefs) is taxed at 0%. See updates and the latest tax rates here.

When withdrawing NOW may make sense

If you expect little or no other taxable income for the next 10 years, it may make sense to withdraw steadily and eventually close your SRS as dividends, interest and capital gains are generally not taxable in Singapore. If your investment returns stay in SRS and grow large enough to push your taxable income past the 0% band, you may pay tax you could have avoided by withdrawing earlier.

Working out your own timing

Your SRS withdrawals have to fit with everything else, including CPF LIFE payouts. The simplest way to check is to lay everything out side by side: what comes in, what goes out, and what is left.

That is what Immortalize's Elderhood Readiness Calculator does. You add your income, such as CPF LIFE payouts and planned SRS withdrawals, alongside your regular spending and one-off costs. The Calculator then shows how your cashflow looks today, over the coming months, over the next few years and beyond. It is built around the question "what if I retired today?", so it is most useful if you are close to your SRS retirement age or already retired. You can try a withdrawal plan, see its effect, and adjust it before you commit.

If you would rather not work through the numbers alone, an adviser can do it with you. YEPPA-enabled advisers are financial advisers who use Immortalize with their clients, including the Calculator. When your adviser invites you and you accept, they can help you manage your plan, from SRS timing to your Schedule of Assets, so their advice is based on your full picture rather than one account at a time.

Frequently asked questions

Q: What is the difference between CPF and the Supplementary Retirement Scheme (SRS)?

A: CPF withdrawals and CPF LIFE payouts are not taxed, while the Supplementary Retirement Scheme (SRS) is tax-deferred: SRS contributions get tax relief, and 50% of withdrawals are taxed at retirement. CPF savings pass to loved ones by CPF nomination, outside the estate, while SRS savings cannot be nominated and pass through the Will or intestacy law.

Q: How much can I contribute to SRS each year?

A: The Supplementary Retirement Scheme (SRS) contribution cap is $15,300 a year for Singapore Citizens and Permanent Residents and $35,700 for foreigners. Contributions made by 31 December qualify for tax relief for that year, within the overall $80,000 cap on personal income tax reliefs.

Q: When can I withdraw from my SRS account without a penalty?

A: Supplementary Retirement Scheme (SRS) withdrawals are penalty-free from the statutory retirement age in force when the first SRS contribution was made.

Q: How much tax do I pay on SRS withdrawals after the retirement age?

A: After the SRS retirement age, only 50% of each Supplementary Retirement Scheme (SRS) withdrawal is taxable, and penalty-free withdrawals can be spread over 10 years. There is no annual withdrawal limit, but someone with no other income can withdraw up to $40,000 a year, or $400,000 over 10 years, without paying tax.

Q: Can I nominate a beneficiary for my SRS account?

A: No. Supplementary Retirement Scheme (SRS) savings cannot be nominated. When an SRS account holder dies, the balance is treated as fully withdrawn on the date of death and passes to their estate, to be distributed under their Will or, without a Will, under intestacy law.

Q: What happens to my SRS account if I die or am terminally ill?

A: If a Supplementary Retirement Scheme (SRS) account holder dies, or withdraws in full because of terminal illness, there is no 5% early withdrawal penalty. Up to $400,000 is exempt from tax, and 50% of any amount above that is taxable. On death, the SRS balance goes to the estate rather than to a nominee.

This article is intended for general informational purposes only and does not constitute legal, financial, tax, or estate planning advice. Laws and regulations vary by country and individual circumstances differ. Please consult a qualified legal or financial professional for advice specific to your situation.