If you are working in Singapore, do you know that there is a voluntary saving scheme for retirement that will lower your taxes every year? This is known as the Supplementary Retirement Scheme (SRS).
Each year, a person can contribute up to $12750 to this account and all this amount will contribute to a tax relief for that year of tax assessment, assuming that you perform the contribution before 31 December of that year. This saving is substantial if you fall into a higher tax bracket.
To open this account, you will need to go to any of the local banks in Singapore, such as DBS, OCBC or UOB. The amount that you put into the SRS account can be invested into stocks or unit trust to generate even higher return than simply putting them in cash.
When the tax assessment comes from IRAS, this amount should be automatically included, as the banks would have already passed the relevant information to IRAS.
As this is a voluntary saving scheme for retirement, it has measures in place to encourage only withdrawal after the statutory retirement age. When you hit that age and start the first withdrawal from SRS, you are given 10 years for penalty free withdrawal. For any amount that you take out, only 50% of it is subjected to taxes. And most likely, you are not working at that time and this means that the tax amount from the actual withdrawal will be either very low, or even $0.
But in the event that you do need the money before the retirement age, you can still withdraw it. However, the full withdrawal amount will be subjected to tax for that assessment year of withdrawal. In addition, there will be a 5% penalty imposed on the withdrawal.
In conclusion, this is a scheme that you should consider if you fall into a higher tax bracket. And remember, to save the taxes for this year, do contribute to it before the end of 31 December. To make it a even better deal, some of the banks have already started promotion to sweeten the contribute, giving vouchers for each contribution made.
