It was reported that only about one in six people earning an assessable income of $50,000 or more a year has opened a Supplementary Retirement Scheme (SRS) account ("Get tax relief while building your nest egg"; Nov 1).

One of the main reasons for this could be the tax structure at the point of withdrawal. Stock capital gains and dividends are not taxed here. But when one withdraws money from the SRS account, 50 per cent of the withdrawal will be taxed, regardless of whether the money was from one's contribution or from investments and dividends.

For example, say you invested $50,000 of your SRS money into stock like Apple 10 years ago. The stock rose from $9.69 in Nov 1, 2005, to $119.50 on Oct 30 this year. Hence, your SRS portfolio would be worth over $600,000 today.

If you are 62 and plan to withdraw the money, half of it, or $300,000, will be subjected to tax. In contrast, someone who invested in the same stock using cash would not be subject to any tax.

It seems as though we are being punished for investing via the SRS. Surely this is not the intent of the scheme. I propose these measures to fine-tune the SRS:

First, at the time of withdrawal, levy tax at a maximum of 50 per cent, instead of the current flat rate. The tax amount can be subject to the SRS account's mix of contribution to capital gains and dividends.

Second, extend the number of years of withdrawal after retirement from the current 10 years to 15 years or more.

The SRS in its current form discourages contributions beyond a certain dollar amount. Fine- tuning this scheme will make it more relevant to Singapore today.

Sam Phoen