SUPPLEMENTARY RETIREMENT SCHEME

Mr Tay Beng Chuan asked the Minister for Finance whether his Ministry will consider removing the age limit of 62 years for workers to qualify for participation in the Supplementary Retirement Scheme (SRS) as long as they continue to work.

Dr Richard Hu Tsu Tau: In deciding the age limit for participation in the SRS, the Government has to weigh the desire of those who want to withdraw their SRS savings as early as possible with the tax benefits, against those who want to contribute to the SRS for as long as they wish.

A fair solution is to peg the age limit to the prevailing statutory retirement age, currently 62. This means that beyond age 62, the SRS account will be closed to contributions but the SRS savings will be freely withdrawable without penalty, and will enjoy the concession of being taxed only on 50% of the sum withdrawn.

The date on which SRS participants can start withdrawing their SRS savings is also the date new contributions will stop. Otherwise there will be "round-tripping" simply for the purpose of gaining the tax benefits without subjecting the contributions to the investment risks which justified the 50% tax concession on sums withdrawn.

The age limit for participating in SRS will rise along with any rise in the statutory retirement age in the future.

The SRS has just been introduced. The Government is monitoring its progress, and will introduce improvements as and when appropriate. If the age limit for contributions is subsequently adjusted to go beyond the statutory retirement age, the contributions may have to be subject to a minimum period before they may be withdrawn with tax concessions.