SINGAPORE - More people opened accounts under the Supplementary Retirement Scheme (SRS) amid economic uncertainties, with data showing an increase in contributions and a rise in participation among young people.
Figures from the Ministry of Finance (MOF) showed that there were 288,793 SRS account holders last year, 30 per cent more than in 2020.
Account holders contributed $14.36 billion last year, $2.13 billion more than in 2020.
The data also revealed that about 25 per cent of SRS account holders last year were between the ages of 18 and 35, up from 19 per cent in 2020.
Introduced in 2001, the scheme encourages individuals to save up for retirement beyond their Central Provident Fund (CPF) savings but also allows them to use the funds for investment and receive tax relief.
SRS offers 0.05 per cent in interest but account holders can invest their money in bonds and unit trusts, among others, to receive higher returns.
Unlike the CPF, participation in SRS is voluntary and the accounts are operated by the private sector.
Observers said the jump in SRS contributions may be due to market volatility brought about by the Covid-19 pandemic.
Professor Lawrence Loh of the National University of Singapore Business School said a major incentive is the tax benefits.
Aside from tax relief for contributions, some investments also offer tax-free returns.
“Also, with the amount being usable for certain investments, SRS can be a very attractive place to allocate their money,” he added.
Prof Loh said the main impetus for opening SRS accounts is that contributors want a higher sum to upkeep a certain quality of life after retirement.
“Moreover, with the increasing uncertainties in the economy, they may need a better hedge for the future,” he added.
Ms Evy Wee, head of financial planning, investments and insurance solutions at DBS Bank, said the SRS can serve as a disciplined way to save more for retirement.
“A greater number of people are investing their SRS monies in unit trusts and insurance savings products to achieve potentially greater returns,” she added.
Mr David Leong, managing director of human resources advisory firm PeopleWorldwide Consulting, said that amid the pandemic, many Singaporeans had opted for jobs in the gig economy, which do not provide for CPF contributions.
“More young people joining the gig economy during the pandemic are also becoming SRS members because SRS is structured to pay better returns than savings left in banks,” he added.
Mr Leong said a plus for account holders is that the contributions can be used to pay for certain insurance products, to cover for old age health concerns.
The increase in SRS accounts comes amid a hike in CPF savings which saw members' balances hit a new high, growing by 9.4 per cent to $505.7 billion as at the end of last year - from $462.1 billion in 2020.
A record $18.3 billion in interest was paid to members last year, the CPF Board's annual report released earlier this month showed.
Voluntary top-ups of Special and Retirement accounts also climbed to a new high of $4.8 billion last year, up from $3 billion in 2020.
The top-ups were made by 294,000 CPF members, with about half doing so for the first time.
