- POSTED: 18 Dec 2013 23:11
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The Supplementary Retirement Scheme (SRS) is seeing healthy take-up rates. The three local banks administrating the scheme said they have seen up to 20 per cent annual growth rate in the number of new SRS accounts opened over the past five years.
SINGAPORE: The Supplementary Retirement Scheme (SRS) is seeing healthy take-up rates.
The three local banks administrating the scheme said they have seen up to 20 per cent annual growth rate in the number of new SRS accounts opened over the past five years.
While the scheme offers tax benefits, financial advisers said it appeals only to a select group of higher-income earners.
The voluntary savings scheme was designed to encourage saving for retirement on top of CPF accounts.
Every dollar put into an SRS account will reduce taxable income by a dollar, capped at S$12,750 since 2011.
And only half of the money withdrawn at retirement age will be taxed.
As at December 2012, there was a total of 82,512 account holders, up 15 per cent on-year.
This year to-date, DBS Bank has seen 15 per cent more account sign-ups compared to the same period a year ago.
Tok Geok Peng, senior vice president and head of consumer deposits at DBS Bank, said: "SRS top-ups can only be made in cash. If you're talking about S$12,750 a year, I can only withdraw after I reach my retirement age. That could be a major consideration.
“Generally, the working population in Singapore is getting more affluent, so I think over time, as more people get more affluent, their income level increases, there will be more appreciation of the benefit of SRS.”
OCBC said there has been 19 per cent more SRS accounts opened each year over the last five years, while UOB reported an average growth rate of 13 per cent per annum.
But some financial advisers said this is coming from a low base.
Tan Siak Lim, director of Financial Alliance’s financial advisory group, said: "If the income is low, about S$50,000 a year, savings in tax is very negligible, or maybe nothing because after all the rebates, usually a person doesn’t pay income tax. So it only appeals to the higher income earners.
“Usually people who are making at least S$100,000 would start to become interested in the tax savings opportunities. If you're making S$50,000, while it is still considered a decent income, you may not have a lot of surplus cash to lock away. S$12,750 is more than 20 per cent of the income."
Account funds may be invested in various assets like equities, fixed deposits and unit trusts, but cannot be used to make direct property investments.
Financial advisers said the scheme reduces investors' exposure to risk as investments are made over a longer period of time.