The Supplementary Retirement Scheme: A Tax Break Dressed Up as a Retirement Plan

Singapore launched the Supplementary Retirement Scheme in 2001 to encourage voluntary retirement savings above the CPF floor.  Twenty-five years later, 516,376 accounts hold S$23.88 billion in cumulative contributions.  By every headline measure, the scheme has grown.  By almost every other measure, it is not working.

The Cash Problem

At the end of 2025, 21 per cent of all SRS monies — S$5 billion — sat in cash.  Uninvested.  Earning 0.05 per cent a year.  That is S$7.65 on a full S$15,300 annual contribution.  Inflation in 2024 was 3.9 per cent.  The real return on that cash was negative 3.85 per cent.  Every year that money sits there, it loses purchasing power in absolute terms.  One dollar in every five in the scheme is actively destroying value.

The compounding arithmetic is unforgiving.  S$15,300 invested annually for 20 years at a conservative 5 per cent grows to S$505,909.  Left in cash at 0.05 per cent, the same contributions reach S$307,458 — barely S$1,458 above the S$306,000 paid in.  Twenty years of contributions.  Twenty years of foregone compounding.  The gap is S$198,451.  That gap is not inflation risk.  It is not market risk.  It is the cost of doing nothing with a retirement account.  The scheme was designed to compound.  Most participants are composting.

The root cause is design.  The SRS defaults to cash.  Members who do nothing stay in cash indefinitely.  Australia’s superannuation system mandates a default investment option — a diversified, age-appropriate fund into which contributions flow unless the member actively opts out.  The United Kingdom’s auto-enrolment scheme does the same.  Singapore’s SRS waits for account holders to decide.  Most never do.  The cash percentage has fallen from 34 per cent in 2014 to 21 per cent in 2025 — but S$5 billion is still sitting still.  The improvement is real.  The problem is worse in absolute terms than it has ever been, because the scheme is larger.

The Structural Flaws

The cash problem is fixable.  The structural problem is harder because it requires acknowledging that the scheme was built for a population that no longer exists.  The SRS mandates a 10-year withdrawal window.  Once a member makes the first penalty-free withdrawal at the prescribed retirement age, the entire balance must be drawn down over those 10 years.  Only 50 per cent of each withdrawal is taxable — that is the tax concession on exit.  The design made sense in 2001, when a Singaporean aged 65 could expect to live another 17 years.  Today, life expectancy at 65 is 22 years.  A woman aged 65 can expect to live to 88.1.  A girl born today has a 64.3 per cent probability of reaching 85.  The median outcome is not 75.  It is 87.  A 10-year drawdown window covering a 22-year retirement is not a retirement plan.  It is a head start on running out of money.

The mathematics is not complicated.  A member who begins drawing at 65 empties the SRS account by 75.  She then lives on CPF Life and whatever savings remain outside the scheme.  CPF Life on the Full Retirement Sum of S$220,400 pays S$1,780 a month on the Standard Plan.  Average retiree expenditure was S$1,384 per person per month in 2023 — across all housing types.  For a condominium dweller, the figure is S$2,840.  For anyone with serious medical needs, the gap between CPF Life and actual expenditure is not a planning assumption.  It is a monthly cash shortfall.  The scheme empties at 75.  The retirement ends at 87.  Twelve years of funding gap, and the SRS is not there for any of it.

The Medical Inflation Problem

Medical inflation hit 16.9 per cent in 2026, per the WTW Global Medical Trends Survey.  Asia Pacific’s average is 14.0 per cent.  The global average is 10.3 per cent.  Singapore leads the category.  This is not a one-year anomaly: 12.3 per cent in 2024, 15.5 per cent in 2025, 16.9 per cent in 2026.  Three consecutive years of double-digit medical inflation, accelerating each year.  Meanwhile, the SRS earns 0.05 per cent on uninvested cash.  Even a fully invested SRS generating 5 per cent annually is losing ground to medical inflation at nearly 17 per cent.

This matters because healthcare is not an optional line item in retirement.  It is the dominant expenditure for the last decade of life.  At 65, a retiree budgets for groceries, transport, and leisure.  At 80, the budget is dominated by hospitalisation, rehabilitation, specialist visits, medication, and long-term care.  None of those costs is growing at 5 per cent.  Integrated Shield Plan premiums rose between 4.5 and 10.8 per cent in 2025 for major insurers.  Claims for most insurers rose 9 to 27 per cent in 2024.  Premiums will follow claims.  A retiree whose SRS was invested in bonds to match a conservative 10-year drawdown horizon is watching her healthcare costs grow at a rate her portfolio was structurally incapable of matching.

The adequacy gap is not theoretical.  A member who wants S$2,500 a month in today’s dollars at 65 needs S$4,100 a month in real 2045 dollars at 2 per cent general inflation.  CPF Life on the Full Retirement Sum covers S$1,780.  The monthly gap is S$2,320 — before a single medical bill.  Apply even a modest healthcare cost trajectory and the gap becomes a chasm.  The SRS was not designed to bridge it.  It was designed to supplement CPF while delivering a tax deduction.  Those are not the same objective.

What Would Help

A default investment mandate.  Cash as a default is indefensible.  Designate an age-appropriate, diversified, low-cost fund as the default for all SRS contributions.  Members who want to manage their own allocation retain that right.  Members who do nothing should not be punished for inertia with a negative real return.  The MOF has broadened eligible investments over the years.  It has not addressed the behaviour that keeps S$5 billion in cash.  Fixing the behaviour requires removing the cash default, not listing more investment options.

An extended or restructured withdrawal window.  The 10-year rule was calibrated to a 65-year-old who died at 79.  That person is gone.  The window should be extended to reflect current life expectancy projections, or replaced entirely with an annuitisation default — converting the balance at retirement age into a guaranteed income stream for life.  The MOF has already exempted life annuities from the 10-year rule.  The next step is making annuitisation the default outcome, not an exception that requires the member to know it exists and act accordingly.

A reclassification of what SRS is.  The scheme’s annual contribution cap is S$15,300 for Singaporeans and permanent residents.  At the top marginal income tax rate of 24 per cent, the annual tax saving on a full contribution is S$3,672.  That is an incentive.  It is not a retirement plan.  A client who contributes S$15,300 a year, invests it at 5 per cent, and draws it down over 10 years from age 65 generates S$6,500 a month during the drawdown period.  After 75, the account is empty.  CPF Life and personal savings carry everything after that.  When medical inflation is running at 16.9 per cent, and life expectancy at 65 is 22 years, a scheme that runs dry a decade into a two-decade retirement is a support structure that collapses at the moment it is most needed.

The SRS functions as a tax-advantaged supplement.  It was never designed to carry retirement alone.  The danger is that account holders — and the advisers who serve them — treat the annual tax relief as evidence that the retirement problem is solved.  It is not.  The tax relief is the enticement.  The investment is the work.  The insurance structure — life annuity above CPF Life, critical illness cover for the working years, long-term care protection for the final decade — is the architecture that holds the retirement together when the market falls, the diagnosis arrives, and the SRS account runs empty at 75.

The Assessment

The SRS is a well-intentioned scheme with a behavioural problem, a structural problem, and a medical inflation problem growing faster than any return it generates.  516,376 accounts.  S$23.88 billion in cumulative contributions.  S$5 billion in cash earning 0.05 per cent.  A 10-year withdrawal window designed for a population with a 17-year retirement.  Medical inflation at 16.9 per cent.  CPF Life paying S$1,780 a month on the Full Retirement Sum.  Average condo retiree expenditure at S$2,840 — before a single medical bill.  The scheme needs a rethink.  More urgently, the account holders who have treated it as an annual tax ritual need to understand what it cannot do — and build the structure around it that the scheme itself will never provide.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code