I received a nasty bill in my mailbox last week ! My tax bill crossed 10K SGD mark this year !!! I’ve always read about how Supplementary Retirement Scheme can help reduce Tax but I have never seriously looked at it. Curious, I googled and found the OCBC SRS website OCBC - Supplementary Retirement Scheme. The website comes with a really neat tax savings calculator that claimed that I would be able to save approximately 1.9 K i.e. 18% if I were to contribute a maximum value of 12,750 SGD.
Source : OCBC
Initially, 18% sounded like a really good bargain. However, there are a set of conditions that I need to comply to. If I decide to withdraw this money earlier, the amount withdrawn is subjected to tax and 5% penalty. If I were to withdraw this amount at or after 62 years old, only 50% of the withdrawn amount is subject to tax. Interest is only at 0.05% p.a on the cash balance in the SRS account but I am allowed to make investment on this account.
To be honest, I think it’s a bad deal. My tax assessment this year already includes the 12,750 SGD that I am planning to contribute to SRS. Thus, to enjoy a tax savings of 18%. I need to lock up my capital and subject myself to another round of taxation when I am at or after 62 on this same amount. Yet, the interest is only at a pathetic 0.05% p.a. unless I actively invest this amount.
Hmm…what is your experience with SRS ? Do you think it’s a good bargain? Any other ideas to save tax? I am all ears :-).