The year is coming to an end. For income tax payers in Singapore, it is also a time for some tax planning for most people before the end of the year. Some of the most common ways to reduce income tax are to top-up CPF account and also contribute to their Supplementary Retirement Scheme (SRS) account. You may refer to the following link on IRAS website to understand the eligible tax reliefs and rebates (Link to IRAS’s income tax reliefs and rebates)
Maximum SRS contribution for 2019
For Year of Assessment 2019, ie income earned, reliefs and rebates for the calendar year 2018, the maximum SRS contribution is S$15,300 for Singaporeans and Singapore PRs, and S$35,700 for foreigners. But do note that the maximum tax relief for one person is capped at S$80,000. If your tax relief has already reached S$80,000, especially high-earning working mothers, there is no point in contributing to SRS.
SRS withrawal age and tax
SRS contribution is a long term commitment as one can only start to withdraw SRS fund many years down the road. The minimum age when a person can withdraw his SRS monies, without penalty, is the official retirement age when the person first contributes to SRS. Currently, as of time of this post, the official retirement age is 62. Therefore, if one contributes to SRS account this year, he or she can only start to withdraw at the age of 62.
Once one starts to withdraw SRS funds, all funds must be withdrawn within a 10 year period and only 50% of the withdraw is taxable for that year.
Long term investment with SRS money
Given the long time frame before SRS money can be withdrawn, the investment horizon for SRS should be long term. Personally, I would go for regular savings plan with low cost index funds.
– SRS Unit Trust platform – POEMS
Based on my search, Philip’s platform for unit trust does not charge platform and sales charge. (POEMS no sales and platform fees) But do note that Philip may start to charge sales and platform fee anytime.
– SRS Unit Trust – Lion Global index funds
Most of the available unit trust are actively managed and hence have a high management fees. However, I have managed to find three unit trust which tracks index and with relatively lower management fees from Lion Global. They are:
- Infinity Global Stock Index Fund (SGD): Fund size: S$58mil; expense ratio of 0.81% as at 30 June 2018 – Link to source
- Infinity European Stock Index Fund (SGD): Fund size: S$7mil; expense ratio of 1.30% as at 30 June 2018 – Link to source
- Infinity U.S 500 Stock Index Fund (SGD): Fund size: S$42.7mil; expense ratio of 0.72% as at 30 June 2018 – Link to source
What is written above is not meant to promote any products, but I hope it will serve as a reference for SRS account holders who contributed to SRS to save on income tax, but is unsure what to invest their SRS monies on.