|
|
|
|
 |
| |
As 2005 kicks off, taxpayers
are likely to continue to mull over whether they should
contribute to the Supplementary Retirement Scheme (SRS)
or not.
 Every
taxpayer who stands to save on income tax each
year should consider SRS. The reduced amount of
$12,000 per year still represents $1,000 tucked
in for retirement each month. The key question
is whether a potential saver/investor can see
the benefit of "locking? his money in SRS because
of the tax savings.
Obvious Candidates for SRS
The obvious candidates for SRS are those who are putting
large sums of money in fixed deposits or single premium
short-term policies. If they are still paying income
tax, SRS will be a good way to save on taxes.
The second group of people who should consider SRS are
the self-employed – the sole proprietors and commissioned
agents. The basic decision is whether to contribute
to CPF on a voluntary basis, to contribute to SRS, or
to do both.
Who’s Drawn To SRS So Far?
Anecdotal evidence shows that SRS is favoured by those
above the age of 45 and are paying relatively high income
taxes. They already have retirement in their sights
and have taken care of items like housing and children’s
education.
Since the tax savings are for one year, the contribution
to overall return is more significant for those with
closer to the age of 62. For example, if the marginal
tax rate is 20 per cent and the SRS contributor is age
52, he has ten years and the average additional return
is two per cent per annum. Considering today’s
low interest returns, this figure is significant.
Lack of Understanding
The relatively low take-up rate for SRS is likely due
to a lack of understanding of its benefits. Once the
scheme is presented as a valuable component for retirement
planning, the response is always positive. Individuals
who want to further enhance their retirement benefits
shouldn’t let this opportunity slip.
David Choo is managing director of PromiseLand Independent. |
| |
 |
|
|
|
|
|
|
|
|
|
|
|
|
Personal Finance Matters 
