Forum: Relook SRS withdrawal policies to better align with retirement needs
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The Supplementary Retirement Scheme (SRS) is a voluntary savings scheme introduced in 2001. Since its inception, it has undergone several changes, and periodic reviews are necessary to ensure that the scheme remains relevant and effective.
I urge the relevant authorities to consider reviewing the current SRS withdrawal policies.
Singapore does not impose capital gains tax on investments by individuals. But under the current SRS framework, those who invest SRS funds prudently and generate meaningful capital appreciation may effectively be taxed on capital gains upon withdrawal, particularly when SRS balances exceed $400,000 during the 10-year withdrawal period.
This outcome may undermine the intended purpose of the SRS as a long-term retirement savings vehicle and could discourage continued participation and prudent investment behaviour.
It may therefore be timely to consider whether SRS withdrawal taxation should be limited to contributed amounts, with capital gains excluded from taxation, to better align the scheme with Singapore’s prevailing tax principles.
The primary objective of the SRS is to support individuals in their retirement planning. With increasing life expectancy, retirement income needs now extend over a longer period. This is reflected in CPF Life, which provides lifelong payouts to address longevity risks.
In this context, it may also be timely to review whether the current SRS tax concession framework, specifically the requirement for withdrawals to be made within a 10-year window, remains relevant and aligned with evolving retirement needs.
Further, while SRS annuities are permitted to provide lifelong payouts, other SRS-approved investments that generate regular income, such as dividend-paying instruments, remain subject to the 10-year withdrawal rule. The rationale for this distinction is not immediately apparent, given that both serve the same purpose of providing sustainable retirement income.
Accordingly, the policy considerations underlying this differentiation should be clarified, and greater flexibility could be considered to allow SRS withdrawals to better align with actual retirement income needs over a person’s lifetime.
Eric Yip Kok Leong
