Making your SRS savings work harder

AS I got closer to my target retirement age, I started moving some of my accumulated wealth into investment solutions that would generate passive income flows, and optimised my Central Provident Fund (CPF) monies via the various CPF schemes.

Another income stream that I built is from opting in to the Supplementary Retirement Scheme (SRS).

Introduced in 2001, SRS is a voluntary scheme to encourage individuals to save for retirement and get a tax relief at the same time. It is heartening to note that SRS continues to gain popularity.

From 2021 to 2025, the number of SRS accounts soared 79 per cent to 516,376 from 288,793. Meanwhile, contributions saw significant growth to S$23.9 billion from S$14.4 billion, up 66 per cent.

Still, SRS members should be discouraged from leaving their SRS balance idle, and instead make it work harder for them.

In 2025 alone, SRS monies left uninvested grew by S$1.1 billion to a mind-boggling S$5 billion. This accounted for 21 per cent of the S$23.9 billion in total SRS contributions as at December 2025, and is significantly higher than the previous uninvested amounts when it had remained below S$3.9 billion.

Due to a personal income tax relief feature, some view SRS primarily as a tax-relief tool. However, merely leaving SRS funds idle hurts the value of your hard-earned savings, as cash balances in your SRS account earn just 0.05 per cent a year in interest.

Most financial advisers recommend assuming an annual inflation rate of 2 to 2.5 per cent to project cash flows. So, your SRS monies should work harder than that.

To recap, annual contributions to SRS of up to S$15,300 for Singapore citizens and permanent residents and up to S$35,700 for foreigners are eligible for tax relief. When it is deducted from your annual chargeable income, your tax is assessed on a lower tax bracket and you enjoy some savings.

In Singapore, the first S$20,000 of net chargeable income does not attract personal income tax.

Thus, you may be able to make tax-free SRS withdrawals of S$40,000 – of which half will be taxed – annually over 10 years, starting from the official retirement age that was in effect when you made your first SRS contribution. This assumes a total SRS balance of S$400,000, no other income, and zero reliefs.

Reap the benefits of compounding

Once you start contributing to your SRS, you will have a long-term horizon ahead before you can start withdrawing your SRS funds penalty-free in your 60s, depending on the statutory retirement age when you make your first SRS deposit.

It is a no-brainer to invest your funds to keep abreast of inflation and enjoy the benefits of compounding over time. After all, there is a range of SRS-approved investment solutions – ranging from low to higher risk – to suit all risk profiles.

For the more conservative investor, even placing funds in a fixed deposit and earning 1.5 per cent a year in interest would be a better option than letting your contributions sit idle.

For those with a long runway, growth-oriented SRS-approved investments, such as unit trusts, Singapore-listed exchange-traded funds, real estate investment trusts (Reits) and shares, can help you reap the benefits of compounding over time.

If you prioritise a balance between growth and stability, consider bond funds, Reits and income-focused ETFs.

As retirement looms round the corner, you may consider investments such as fixed deposits, Singapore Government Securities, Treasury bills, Singapore Savings Bonds, money market funds or single premium insurance, which offers stability.

Shares, Reits and ETFs are the most popular options among SRS members, representing 24 per cent of all investments as at December 2025. Insurance products make up 20 per cent, and unit trusts are 11 per cent of all investments.

Before investing, consider how long you have until retirement, how much volatility you can tolerate, and whether you are focusing on capital preservation or long-term growth. Understand how each solution fits into your overall investment and retirement plan.

Remember that diversification is key.

In my younger days, I invested my SRS monies mainly in local shares and Reits. I was mindful of not putting all my eggs into one basket, and would invest in companies of different market capitalisation and industries.

Diversification helps to smooth out returns and reduce overall portfolio risk, enhancing your portfolio’s resilience against unforeseen market events.

As all investments carry an inherent risk, you should be prudent about what to invest in, or you can seek professional advice.

Consider fees which may come with the investment, as different banks or firms may charge different brokerage and transaction fees, or offer different incentives and promotions.

Do know that all profits made from investing your SRS contributions will return to your SRS account. Reinvesting these gains accelerates wealth accumulation.

As I believe I will start the penalty-free withdrawals in a couple of years, I have moved some of my investments into lower-risk options. I will also structure my withdrawals over 10 years when I am drawing less or no chargeable income, to minimise my tax bill.

I am mindful that I do not need to liquidate all my SRS investments. I have a few stocks that I will transfer to my personal stock investment account at a small administrative fee, without selling them.

The immediate tax relief you get today is only part of the benefit of the SRS. The value-add comes from how you make your SRS monies work harder for you. Take control today to ensure that you reap the benefits, and will be rewarded with a sustainable retirement.

The author is head of financial planning literacy at DBS, and author of Money Smart and Retire Smart