SRS is a tax deferral scheme. Under a typical tax deferral scheme where a sum of money is not taxed upfront but instead taxed at a later time after netting off all subsequent capital gains and losses from investments, the individual will be no worse off than if the sum of money was taxed upfront and all subsequent capital gains were exempt from tax. 

As an illustration, consider a person who has an earned income of $10,000.  Assume his marginal tax rate is 10%.  He pays an income tax of $1,000 and invests the balance of $9,000.  He makes a capital gain of 3% each year until he reaches the retirement age 10 years later.  Assume his marginal tax rate remains at 10% at retirement.  At the end of 10 years, he will have a total of $12,095.

Total = ($10,000 0.9) 1.03 1.03 .(for 10 years) = $12,095

Next, consider another person with the same earned income of $10,000 but who invests the sum under a tax deferral scheme.  He does not pay income tax on $10,000 and is able to invest the full $10,000.  He makes the same capital gain of 3% each year until he reaches the retirement age 10 years later.  The capital gains accumulate tax-free in the account.  At the end of 10 years, everything in the account is taxed at the same marginal tax rate of 10%. After paying tax, he will also have a total of $12,095.

Total = $10,000 1.03 1.03 .(for 10 years) 0.9 = $12,095

In fact, under the SRS, the individual will be better off, as only 50% of the withdrawals will be taxed.  The same person above will have a total of $12,768 if he withdrawals everything in the first year of retirement.

Total = 0.5 ($10,000 1.03 1.03 .(for 10 years))

           + 0.5 ($10,000 1.03 1.03 .(for 10 years)) * 0.9

        = $12,768

He will have even more if he spreads his SRS withdrawals over a period of 10 years (or more if the statutory retirement age increases), which is allowed under the SRS.

No. We do not have a provision in the SRS allowing for the nomination of a beneficiary of an SRS account. This is because SRS savings are meant for the SRS members own retirement purposes. However, if the SRS member passes away, the SRS balances will form part of his estate and will be distributed according to his will or the law (if a will does not exist). There will be no 5% penalty on withdrawal and only 50% of the sum standing in the SRS account after deducting the amount of deemed withdrawal upon death that is exempt from tax will be subject to income tax. Please also note that SRS operators may require the Grant of Probate or Letters of Administration to be produced by the executor or administrator of the estate to ensure that the assets in the SRS are distributed correctly.

Any financial institution licensed by MAS may offer its products to SRS account holders. There is no additional registration process for SRS product providers. However product providers should clarify with the SRS operators the settlement procedures for SRS transactions.

We want to highlight that SRS product providers must generally 'tag' the product purchased with SRS funds. Specifically, an SRS product provider must comply with the following:

• It must return the cash from the liquidation of any product originally purchased with SRS fund to the SRS account (i.e. to the SRS operator) and not to the account holder directly.

• It should be prepared to supply any information relating to the SRS investments to the SRS operators (which they may need in fulfilling their reporting requirement prescribed by the authorities).

• All returns from the investments (distributions, dividend etc) must also be paid to the SRS account and not to the account holder directly.

No. All SRS contributions must be made in cash.