Enhancing SRS: Experts' take

Mr Thomas Tan of OCBC Bank says the inability to utilise SRS funds may outweigh its tax-saving benefits. KPMG Singapore's Mr BJ Ooi recommends tax exemption on SRS withdrawals of up to $400,000 at drawdown age. Ms Kerrie Chang from Ernst & Young beli
Ms Kerrie Chang from Ernst & Young believes the withdrawal sum should not be taxed at all from the statutory retirement age (now 62).
Mr Thomas Tan of OCBC Bank says the inability to utilise SRS funds may outweigh its tax-saving benefits. KPMG Singapore's Mr BJ Ooi recommends tax exemption on SRS withdrawals of up to $400,000 at drawdown age. Ms Kerrie Chang from Ernst & Young beli
KPMG Singapore's Mr BJ Ooi recommends tax exemption on SRS withdrawals of up to $400,000 at drawdown age.
Mr Thomas Tan of OCBC Bank says the inability to utilise SRS funds may outweigh its tax-saving benefits. KPMG Singapore's Mr BJ Ooi recommends tax exemption on SRS withdrawals of up to $400,000 at drawdown age. Ms Kerrie Chang from Ernst & Young beli
Mr Thomas Tan of OCBC Bank says the inability to utilise SRS funds may outweigh its tax-saving benefits.

Ms Kerrie Chang

PARTNER, PEOPLE ADVISORY SERVICES (MOBILITY) AT ERNST & YOUNG SOLUTIONS:

"A common complaint against the SRS scheme is the tax treatment upon withdrawal.

Though only half of the withdrawn sum at 62 years old - or following the 10-year holding period for foreigners - is subject to tax, it has been highlighted that the income earned through the years of saving and investing would ordinarily be considered investment income and therefore not subject to tax here.

By subjecting 50 per cent of the total withdrawal to tax, the Government is effectively taxing income that if otherwise earned by an individual may not be subject to tax.

To strongly encourage individuals to contribute to SRS and enhance their savings for retirement, our recommendation is that the withdrawal sum should not be taxed at all from the statutory retirement age (now 62), and following the 10-year holding period for foreigners.

This means that an individual has the flexibility to withdraw his or her SRS savings from 62 in a lump sum or over a shorter span of time without incurring a tax cost.

Currently, for individuals who prematurely withdraw their money from the SRS, 100 per cent of the sum will be subject to tax and a 5 per cent penalty will be imposed, except in certain specific circumstances such as death and medical grounds.

The penalty imposed negates the tax savings. While we note that this is intended to discourage premature withdrawals, perhaps only the amount that equates the tax deductions allowed in respect of the SRS contributions made should be taxed and the penalty removed."


Mr BJ Ooi

HEAD OF PERSONAL TAX AND GLOBAL MOBILITY SERVICES, KPMG IN SINGAPORE

"Currently, 50 per cent of the sum withdrawn at drawdown age is subject to tax. I recommend tax exemption on SRS withdrawals of up to $400,000 at drawdown age.

Another recommendation is to allow for the option to enjoy tax-free withdrawal (up to $400,000) before 62, on contributions that have been made to SRS for at least 20 years. This would encourage younger workers to participate in the scheme.

In addition, encourage companies to match employee contribution by allowing tax deferral on the matching."


Mr Thomas Tan

HEAD OF WEALTH ADVISORY AND SPECIALISTS, OCBC BANK

"Feedback from customers indicates they prefer not to have their funds locked up until age 62. Any early withdrawal incurs a 5 per cent penalty.

The inability to utilise SRS funds may outweigh the tax-saving benefits of SRS. As such, some customers would prefer if the SRS scheme could offer some flexibility of early withdrawal - similar to CPF - at age 55, for example, if it hits above a certain amount.

This would probably attract more people to contribute to their SRS accounts. For high-income earners, feedback indicates customers would prefer a tiered contribution cap to their SRS accounts based on an individual's tax bracket."

Lorna Tan

A version of this article appeared in the print edition of The Sunday Times on November 05, 2017, with the headline 'Enhancing SRS: Experts' take'. Print Edition | Subscribe