Supplementary Retirement Scheme, more colloquially referred to as SRS, is not a foreign concept to many Singaporeans. It is a deferred tax scheme which helps you save for the future while reducing your tax expenses now.

If you are a mid to high-income earner, SRS is a great way to save tax in addition to CPF top-up tax relief as SRS contributions are eligible for tax relief the following year. 

You can reduce your final tax payable by getting a dollar-for-dollar tax relief on your SRS contributions that reduces your chargeable income.

For example, if you contribute to your SRS account by 31 Dec 2023, you can get tax relief in the Year of Assessment 2023 (tax to be paid in 2024). Here’s some quick math: if your taxable income is S$100,000 and you put $10,000 into your SRS account, you pay tax on $90,000, not $100,000.

Note that a personal income tax relief cap of $80,000 applies to the total amount of all tax reliefs claimed for each year of assessment. This includes your SRS contribution.

However, many people are content with these little tax savings and they stop there,  Do you know the SRS interest rate is only 0.05% for funds idling in the account? Your one-time tax savings will actually be eroded over the years by inflation.

How can you enhance the return of your SRS funds? What instruments can you invest in using SRS? In this article, I will explain to you what SRS investment products and options are there.

At a Glance

SRS was introduced in 2001, it complements the CPF Retirement Sum scheme to help people working in Singapore build up their nest eggs and obtain some tax relief at the same time. You can read my article “All you need to know about SRS” for more details about the scheme.

Currently, the maximum yearly contribution to SRS is

  • $15,300 for Singaporeans and PR
  • $35,700 for foreigners

To enjoy the tax savings, you need to open an SRS account with one of the local banks, i.e. DBS, UOB and OCBC.

You Don’t Have to Buy What the Bank Sells

Recently, one of my clients opened an SRS investment account at a local bank. Somehow the relationship manager gave him the impression that he must use his SRS to buy one of the unit trusts from the bank to enjoy the tax savings, and he ended up paying a hefty sales charge for that!

The truth is that you don’t have to. There is a wide range of options that you can choose from. I will talk about it later.

Should You Invest Your SRS Funds?

Definitely!

Contributing to SRS and leaving it uninvested is like buying a new car and leaving it in the car park. You get the one-time delight of owning a shiny gadget, but the car depreciates in value every day.

Unfortunately, many people are unaware that they can enhance the return of their SRS funds. As of Dec 2022, there were about 387,377 SRS account holders here who had contributed a total of $16.3 billion to their accounts.

But 21% of all SRS funds were sitting in cash. That’s about $3.42 billion lying idling, earning only 0.05% even in today’s high-interest rate environment. 

Why you should invest your SRS money?

Potential higher returns: If you leave your SRS money with a 0.05% deposit return, you are not taking care of your own retirement. Even if you leave it to a time deposit or an insurance policy, you earn multiple times higher returns. Besides, you can invest in funds, ETFs, shares, and REITs. Since you have a long investment time horizon, it is not difficult to earn a reasonable return.

Non-taxable investment gains: Any gains realized on your investments are not subject to income tax before the withdrawal. Singaporeans sometimes take this for granted. But for many foreigners, this is a dream come true.

Ability to withdraw SRS in the form of investment: If you have accumulated a sizable investment portfolio, you may not want to sell them when you retire. The good news is, since July 2015, SRS members will be able to apply to their SRS operators to withdraw an SRS investment by transferring the investment out of their SRS accounts (e.g. into their personal Central Depository (CDP) account), without having to liquidate their SRS investments. This is only applicable to the types of withdrawals which qualify for the 50% tax concession: 

  1. withdrawal on or after the statutory retirement age prevailing at the time of an SRS member’s first contribution (prescribed retirement age);
  2. withdrawal on medical grounds;
  3. withdrawal in full by a foreigner who has maintained his SRS account for at least 10 years from the date of his first contribution; and
  4. actual withdrawal made by an SRS member or his legal personal representative (if he is deceased) from his SRS account, after the SRS investment that is to be withdrawn had earlier been deemed withdrawn upon death or after the expiry of the 10-year withdrawal period.

What Can You Invest Using Your SRS Funds?

You can’t use SRS to buy a property. But there is a wide range of financial products approved under the SRS scheme, including:

Before I go deeper into this, you can download the SRS Cheat Sheet here for a concise guide.

If You Are a Conservative Investor

Investing can be intimating to first-time investors. But you don’t have to jump to the wagon straight away.

Bonds

If you are extremely conservative, you have the option to invest in Singapore Government Securities (SGS) or Singapore Treasury Bills (T-Bills), and the government has allowed Singaporeans to use funds from their SRS account to buy Singapore Savings Bonds (SSB) with effect from December 2018.

In the previous decade, these were not attractive investments because: 

  • The return was very low given the low-interest rate environment and AAA credit rating of the Singapore government. 
  • The liquidity was very poor due to fewer transactions. 
  • The application process was tedious and expensive as the banks and brokers had little incentive to promote them. 

But the good news is that ever since 1 February 2019, applications for SSB, SGS bonds and T-bills can be made through the internet banking portals of your SRS Operator (DBS/POSB, OCBC or UOB). 

SSB is a great choice of investment using your SRS funds because the returns you can expect to get if you hold the SGS bond to its maturity is very clear-cut. For instance, if an SGS bond is paying out 4% every year for every $1,000 face value, you will get $40. When the SGS bond matures, you are also guaranteed to get the face value of the bond (in this case $1,000).

On the other hand, while it is considered to have low returns and poor liquidity, T-bills have recently garnered huge interest recently as their yield has risen rapidly. According to the Treasury Bill statistics, the rate jumped from 1.66% at the start of July 2022, to 4.22% at the start of December 2022. To put that into perspective, that’s more than 2.5 times in less than half a year. 

Single-Premium Retirement Income Insurance (Limited Period Payout)

Retirement income insurance is a kind of Retirement Plans that pays you Guaranteed Income when you retire. It goes hand-in-hand with the SRS structure. Click here to read my earlier article about how the Retirement Income Plan works.

The article was written in 2017 when the target return of an insurance product was around 3% to 4% per year. But I have stopped recommending buying insurance plans using SRS in recent years as the annualized returns have come down significantly and Singapore government bonds can deliver better-guaranteed returns than insurance products. 

Nevertheless, here is a list of retirement plans which you can use SRS to buy now. I will update you again when the insurance returns recover in the future. 

Just take note an insurance plan is protected under the Policy Owner Protection scheme. If the insurer goes bust, up to $100,000 guaranteed benefits are protected.

The Ministry of Finance has set some conditions for an insurance plan to be eligible for SRS:

  • Only single premium products are allowed (including recurrent single premium products, encompassing both annuity and non-annuity plans)
  • Life cover (including total and permanent disability benefits) will be capped at 3 times the single premium
  • Plans can allow for a contribution continuation feature/benefit upon disability.
  • Other types of life insurance e.g. critical illness, health, and long-term care are excluded
  • Trust nomination is not allowed for life insurance products purchased using SRS funds.

Single-Premium Annuity (Lifetime Payout)

If you want to receive a lifetime payout instead of a defined payout period, you can consider annuity plans. The annuity options in Singapore are very limited.  There are only a few plans available now.

For the same reason as above, I do not recommend these types of plans for SRS investment for now.

Short Term Endowment Plans

Short-term endowment plans are popular in the past few years given the prolonged low-interest-rate environment. A short-term endowment plan is normally a 3 years savings plan with a guaranteed interest on maturity. 

As such plans are also protected under the Policy Owner Protection scheme, they can be an alternative to Singapore government bonds mentioned earlier. 

You may ask why you may consider short-term endowment plans if T-Bills are paying a higher yield than them. Don’t forget T-Bills are short-term bonds whose tenures are mostly 6 months. You can think about short-term endowment plans as a lock-in rate protection for the next 3 years should interest rates fall again in the future. 

Tax Consideration When Using SRS to Buy Insurance

You should not forget SRS is not a tax exemption scheme, but a tax deferment scheme. It means you could be subject to income tax when you receive your insurance payout when you retire.

The insurance need not mature at the prescribed retirement age. But if you purchase a life annuity, you will be taxed on 50% of the total annuity payouts each year, for as long as the annuity payouts are received.

Currently, you have up to 10 years to withdraw your SRS after the statutory retirement age or the date of the first withdrawal. You should also take note that you are not allowed to surrender an annuity policy after the SRS account has been closed or deemed closed.

If your SRS account is still open, your monthly annuity payouts must be returned to the SRS account before you withdraw them. If your SRS account is closed, your monthly annuity payouts may be paid into your bank account directly.

If You Want a Higher Return

There are a few limitations if you use SRS to buy insurance or bonds. 

  1. You must purchase a single premium product. It means you need a big capital outlay to have a reasonable payout
  2. You have no flexibility to change the payout structure once it is set
  3. Your rate of return is not as attractive

Typically, the conservative options are more suitable for a person who is approaching retirement age and has a substantial amount in their SRS. If you are just starting to contribute to SRS, you should consider investing.

SRS investment is a big topic which I will just touch on briefly in this article. Feel free to leave your questions below and I will talk about them in more detail in the future.

Unit Trusts for SRS

If you just open your SRS account, the bank relationship manager will show you a few “approved” funds. What they show you are just the funds distributed by the bank.

In fact, there are more than 1000 SRS-approved funds in Singapore. Many people have a misunderstanding about unit trust. I recommend you to read my earlier article “how to dig below the sales pitch and choose the right unit trust”.

As a start, you need to know what funds are available. Here is how you can check them out.

  1. Go to fundsupermart fund selector
  2. Select “SRS available” under CPF/SRS?
  3. Click “Generate Funds Table”

You will get the whole list of SRS-eligible funds.

Index Funds and ETFs for SRS

If you want to adopt a passive investment strategy, you can use index funds or ETFs. Here are some of the popular options:

Underlying MarketsIndex Funds or ETFs
Global StocksLion Global Infinity Global Stock Index Fund
America StocksLion Global Infinity U.S. 500 Stock Index Fund
European StocksLion Global Infinity European Stock Index Fund
Singapore StocksSPDR Straits Times Index ETF

Nikko AM Singapore STI ETF

Singapore REITsLion-Phillip S-REIT
Singapore BondsABF Singapore Bond Index Fund
GoldSPDR Gold Shares
China Tech StocksLion-OCBC Hang Seng Tech ETF

Some smart beta funds provided by Dimensional Fund Advisors are also approved under the SRS scheme, but you have to go through a Dimensional trained adviser.

You can contact me using the form below if you want to understand more about Dimensional funds.

Stocks and REITs for SRS

You can also choose to invest in stocks using your SRS funds.

To do so, you need to contact your stockbroker to update your SRS Investment bank account details. After the linkage has been established, you will need to select the option “SRS” under “trade type” to conduct an SRS stocks trade. Please note “Contra” is not available for SRS trades.

You can use SRS to buy most of the individual stocks and real estate investment trusts listed in SGX, but I discourage you to do so. Why?

Individual stocks and REITs are subject to corporate actions, and it can get quite complicated when you are not investing with cash.

For example, if a company issues rights, you need to top up to prevent your shares from being diluted, but you may not have enough SRS balance or you may not be able to top up if you have maximized the yearly limit of SRS contribution.

Nevertheless, if you really want to invest in shares, there are some options available, for example: 

  • OCBC Blue Chip Investment Plan
  • POSB Invest-Saver
  • Phillip Share Builders Plan

Some brokers will handle the corporate actions (though not in a perfect way) for you, you need to check the terms of each investment account. Also, bear in mind the brokerage fee is not attractive for small investment accounts.

The good news is that in recent years, popular brokers such as Moomoo and Tiger Brokers have entered Singapore and offer powerful platforms and competitive fees. You can check them out. 

But to be frank, investing in stocks is an easy but difficult way to make money for many retail investors. My honest opinion? Most people are better off investing in unit trust funds or ETFs using an SRS account.

Tax Considerations When Using SRS to Invest

Earlier on, I highlighted the tax issues of using SRS to purchase insurance. If you use SRS to invest, all proceeds from the sale of your SRS investments will be returned to my SRS account. The tax will be imposed on the amount subsequently withdrawn from the SRS account. The amount in the SRS account will be deemed to be withdrawn immediately after the end of the 10-year withdrawal period, and 50% of the balance will be subjected to tax.

How about dividends?

Generally, shares and unit trust in Singapore adopts a one-tier exemption system. It means dividend distributions from unit trusts and shares purchased with SRS funds and deposited into the SRS account are not taxed.

How to get started investing your SRS

We have covered a lot today. It may sound hard for you to grasp all these options. But one thing is for sure, you should not leave your SRS account idling.

If you find the information useful, join my Telegram Channel or subscribe to my mailing list below for weekly financial tips on retirement and investment.

As a licensed independent financial adviser, I helped my clients evaluate and review their SRS investment options and recommend investment portfolios that suit their needs. I manage a proprietary Global Momentum Compass (GMC) Portfolio which uses SRS-eligible investment instruments and delivers consistent returns.

The advantage of taking advice from an independent financial adviser is that your options are not limited to what the bank sells and you can plan your retirement in a holistic way.

If you want to find out more, you can fill up the application below for a non-obligatory discovery meeting to learn how to enhance your SRS returns.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

  • Are there management fees involved in using SRS funds to buy ETFs? How fast does the bank take to open a SRS account?

  • “The amount in the SRS account will be deemed to be withdrawn immediately after the end of the 10-year withdrawal period, and 50% of the balance will be subjected to tax.”

    Can you explain this abit more? I have the impression that when i sell of the stocks (purchased with SRS), i will be subject to 50% tax?

    Also, do you recommend to do RSP for SRS to leverage on dollar-cost averaging?

    • Hi, Eason,

      If you sell the stocks and it goes back to SRS, you will not incur the tax. The tax only applies when you withdraw the SRS to cash.

      Whether you should use RSP depends on your investment strategies, it doesn’t matter whether you use SRS to invest or not.

    • Yes, I would say unit trust is the most suitable instruments for SRS given the flexibility and range of assets you can access. But you need to make sure you invest through a zero sales charge platform.

  • Hi Ivan
    We already put money in an SRS account with DBS (dec 2019) but found out later on that investments options seem limited for US Citizen. Any advice on how to proceed/who to contact ?
    Thank you
    Loic

      • Hi Ivan – DBS only offered ”fixed deposit” : would you have a recommendation to where we could go to get higher return (insurance savings) plans ? Which broker or through you maybe ? I wished our health manager at DBS warned us before we put the money into the SRS account…

  • Hi Ivan, I have purchased STI ETF using SRS via POEMS and thinking off selling off the ETFs, the returns are not that great I suppose. But I do not see it in my POEMS account. How can I sell it?

  • You mention it is possible to transfer an investment like a stock out of SRS without liquidating the investment. Is the reverse also possible e.g. to inject a SG stock that was initially made with cash into SRS?

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