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One-third of SRS money lies idle as cash
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According to Ministry of Finance statistics, the number of Supplementary Retirement Scheme (SRS) accounts more than doubled to 116,466 last year from 53,656 in December 2009. The number was just 11,890 in the year of its inception in 2001. Total SRS contributions have surged to $5.97 billion since 2001.
Most SRS account holders are aged 36 to 55. This indicates that the scheme appears attractive mainly to middle- and high- income earners and those who are nearing retirement age. Another reason for the predominance of this age bracket is that most people typically do not plan for retirement till they are in their mid-30s or older.
You can make your SRS contributions work harder by buying into various investment instruments such as shares, exchange- traded funds (ETFs), real estate investment trusts (Reits), bonds, structured deposits, fixed deposits, single-premium insurance plans and unit trusts. Direct property investments are not allowed.
However, the statistics show that a significant proportion - 32 per cent or about $1.9 billion of SRS funds - is lying idle as cash. Among the SRS-approved instruments, shares, Reits and ETFs are the most popular, accounting for 28 per cent of an SRS portfolio, followed by 22 per cent parked in insurance plans.
Ms P'ing Lim, head of deposits and secured lending at DBS Bank, noted that its customers have been taking a proactive approach to the funds in their SRS portfolios. This shows that a large number of them are savvy enough to use their SRS accounts concurrently for tax savings and investments.
"Close to 70 per cent of the contributions are invested in equities, unit trusts, shares, bonds and insurance products. We are seeing more SRS account holders using their funds to purchase single-premium bancassurance (insurance sold via banking channels), unit trusts and equities," said Ms Lim.
"SRS is increasingly popular with our customers and we are seeing a growth rate of 20 per cent year on year. Over 70 per cent of new SRS accounts with DBS are opened via iBanking," she added.
DBS is the only bank here that allows customers to open and contribute to SRS accounts via online banking instantly. The other two SRS operators are OCBC Bank and United Overseas Bank.