Reminder: Retirement Age is Increasing; Open and Fund Your SRS Account Now

If you haven’t watched my video on retirement age increasing in Singapore, you should:

Even if you are far away from retirement age, the increase in retirement age is something that affects you, and there are steps you can and should take before 1st July 2022.

Retirement age is increasing

For some context on what is happening: from 1st July 2022, the retirement age in Singapore will officially increase from 62 to 63, and the re-employment age will increase from 67 to 68. By 2030, the government intends to gradually increase the retirement age to 65, and the re-employment age to 70.

What is retirement age and re-employment age?

The retirement age in Singapore disallows employers from dismissing employees because of the employee’s age. For the avoidance of doubt, this does not mean that Singaporeans are mandated to work until retirement age. It is protection against ageism for older Singaporeans who wish to continue working.

Upon reaching the re-employment age, employers must offer re-employment to employees as long as they:

• a Singapore citizen or Singapore permanent resident
• have served their current employer for at least 3 years before reaching retirement age
• have satisfactory work performance, as assessed by your employer
• are medically fit to continue working
• were born on or after 1 July 1952

Will CPF policy change as a result?

CPF withdrawal policies and ages are not tied to the statutory retirement age, and therefore will not change as a result of the increase in retirement age. PM Lee has specifically mentioned during National Day Rally 2019 that the change in retirement age does not affect CPF policies and withdrawal ages.

What does it have to do with me then?

Even if you are years and even decades away from retirement, you have to do something now: open and fund a Supplementary Retirement Scheme (SRS) account. This is because one of the main benefits of the SRS account is penalty-free withdrawals at retirement age, and that number is fixed to the prevailing statutory retirement age when you put in your first dollar into your SRS account.

For instance, if you open and put a dollar into your SRS before 1st July 2022, your SRS account will now allow you to make penalty-free withdrawals from age 62 onwards. Procrastinate until after this date, and your SRS account will only allow such withdrawals from age 63 (or whatever the prevailing statutory retirement age is at the point you start your account).

What’s the use of an SRS account?

I intend to make more SRS-related content to explore its advantages and some downsides, but the short story is that SRS lets you save on tax when you are financially productive, and then have the ability to withdraw your funds with significantly less tax burden when you are bringing in lower or no income in the future. It is particularly useful for people who earn high incomes, or foresee themselves earning more in future.

How do I open an SRS account?

You can open an SRS account as long as you are at least 18 years of age, not an undischarged bankrupt, and you are of a sound mind and able to handle your own affairs. Singaporean citizens, PRs, and foreigners are eligible to open an SRS account.

Three banks – OCBC, UOB, and DBS – support the opening of an SRS account, and you can just pick a bank you are comfortable with since there is no practical difference in interest rates or features between the banks aside from the user interface of the banking app.

Do note that it is illegal to open more than one SRS account.

Conclusion

Given that it takes all of $1 to fund the account, there is virtually no loss for doing this before 1st July 2022. You can always withdraw your $1 any time, even before your retirement age, just that there is a 5% penalty if you do so before the statutory retirement age tied to your SRS account.

Banks do have promos from time to time to encourage the opening of SRS accounts, but there are no current promos. Some may want to wait until banks offer their usual $50 to $100 or so sign-up gifts, but you’d have to decide if that amount is worth having an SRS account that allows for penalty-free withdrawal at a later age.

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