Under the current tax brackets, you wont have to pay any income tax if you spread your SRS withdrawals over 10 years @ $40k per year, and have $40k at the end of the period(which will be taxed at that time)

A couple of points you might want to consider as well:

Look at the issue of how much tax one is saving – at the 14% bracket, the saving is $1606, which translates into no more than 1.76% of your _taxable_ income (as your taxable income will be at least $91,475). At the 8.5% and 20% brackets, the savings are no more than 1.89% and 0.69% respectively.

So by annually putting aside $11475 + an additional 2% of one’s taxable income (but this 2% must be realised thru cutting on expenses, not other savings)into a long-term invest plan, one can replicate the “benefit” of SRS.

Secondly, trying to invest SRS funds into stocks means one is restricted to either locally offered unit trusts, ETFs or whatever’s listed locally. For an investor wanting to create a globally diversified SRS portfolio will have to contend with unit trusts and ETFs which have high sales/brokerage charges and annual fees in comparison with whats available say in US/UK markets. So expect the CAGR of your SRS porfolio to lag 50-100bps behind a similarly diversified non-SRS porfolio.

See my calculations posted as a comment at:
http://mrwangsaysso.blogspot.com/2009/12/supplementary-retirement-scheme.html

My calculations there are based on the maximum tax saving of $2,295 for a high income earner.

Here’s an edited copy of that comment:

Let’s assume the time horizon is 20 years; and that the yearly tax saving of $2,295 is invested and compounded at 5%. At the end of 20 years, you will have $75,886 from the investments.

Let’s assume the SRS account earns you 2.5% return a year. In 20 years, your SRS will have $293,125. (Since the SRS money has certain restrictions, e.g. investing in property is not allowed, I think it’s reasonable to assume a lower return for SRS money.)

At end of 20 years, tax savings + SRS = $369,011.

It’s a sizable amount, but you would have achieved a slightly better outcome had you invested the yearly streams of $11,475 and achieved just a 4.73% per year over the same 20 years.

You are looking at a per annum tax savings, not 1-off over the next 30 years

my only grouse is DBS only provides monthly statement (too long)

Btw, the income tax rate here doesn’t “jump”. On the contrary, it’s a progressive rate system. Higher earners pay higher tax rates, but “progressively”. I searched a bit and found this graph best illustrates what I’m trying to say.

I suspect if your chargeable income is above 80,000, there should be some meat in the benefits because the personal income tax rate makes the biggest jump from 8.5% to 14.5% beyond 80,000.

In this second example, http://www.finatiq.com/helpcentre/Hcr_Basics_SRS.shtm , it shows a $1000 savings. The future tax structure is a moderate risk if you are very far from retirement.

On the other hand, if you have less than 10 years from retirement, the tax structure changes should be far less risky, and you may be able to knock $1000 or so each year off your income tax. I also think the banking costs are negligible if you are putting into an ETF and not trading actively.

But I do not understand the logic of the scheme at all. Obviously they will attract people who are going to trade very little, close to retirement and have high income, but the savings to be made is only about $10000 (let say $1000 for 10 years) which also have to be partially taxed. All that hassle and lock down for just $10K isn’t worth a lot for those who earn 100k. Maybe that’s one way to save up a paid trip to say China after retirement.