Mr Sam Phoen ("Fine-tune SRS to spur take-up"; last Sunday) suggested more favourable tax treatment for Supplementary Retirement Scheme (SRS) withdrawals and for the withdrawal period after retirement to be extended.

The SRS is a tax deferral scheme. Under the SRS, a person's contribution in a year is granted tax relief in the following year.

This tax saving adds to the sum which one can invest and accumulate returns. Taxes are levied only when the taxpayer makes a withdrawal, and even then, only 50 per cent of the savings are taxed.

As most taxpayers would make withdrawals during the retirement years, the effective tax rates would generally be lower. Moreover, withdrawals can be streamed out over 10 years to further reduce tax payable.

We will consider Mr Phoen's other suggestion of extending the SRS withdrawal period as part of our regular SRS policy review, and we thank him for his feedback.

Lim Yuin Chien

Director

Corporate Communications

Ministry of Finance