Both the Central Provident Fund Special Account (CPF SA) and Supplementary Retirement Scheme (SRS) are designed to help you save for retirement, but they have different structures, rules, and benefits.
Let’s break down the key differences:
Table of contents
- What is a CPF SA Account
- What is a SRS Account
- Difference Between CPF SA and SRS
- Which Account Should You Top Up: CPF or SRS SA
What is a CPF SA Account
Before we go into what a CPF SA account is, let us give you a quick overview of the CPF system.
The CPF system is a mandatory savings plan designed to help Singaporeans save for retirement, healthcare, and housing.
Your CPF savings are divided into several accounts (Ordinary, Special, Medisave, and Retirement), each with different purposes:
- Ordinary Account (OA): used for housing, education, insurance, and investment
- Special Account (SA): used for retirement planning
- Medisave Account (MA): used for healthcare expenses
- Retirement Account (RA): used for your retirement
Because the SA is designed to help Singaporeans better prepare for retirement, it offers an attractive interest rate of 4.14%, much higher than the 2% that the OA gives.
It’s important to note that for members aged 55 and above, the CPF SA will be closed from the second half of January 2025, and all funds will be transferred to your RA.
What is a SRS Account
The SRS is a voluntary retirement savings scheme aimed at preparing you for your golden years. It’s primarily for people who want to save more for retirement while enjoying the tax savings brought about from funding their SRS accounts.
Difference Between CPF SA and SRS
Eligibility
- CPF SA
If you are a Singapore Citizen (SC) or Permanent Residents (PRs), you automatically have a CPF account once you start working.
- SRS
Unlike the CPF system, Singaporeans, PRs, and foreigners can contribute to their SRS accounts.
Contributions
- CPF SA
Contributions to the CPF SA are mandatory. Both you and your employer contribute a percentage of your salary each month. The contribution rate varies depending on your age group, with the total contribution split between different CPF accounts.
There’s also a contribution limit of up to $8,000 annually and an additional $8,000 if you make a top-up to your loved ones’ accounts.
- SRS
On the other hand, contributions to the SRS are voluntary. You can choose to contribute as much as you like, up to an annual limit. There’s no requirement to top up, but many still do this to enjoy the income tax relief benefits of doing so.
SRS has an annual contribution cap of up to $15,300 for Singaporeans and PRs, and $35,700 for foreigners—a limit that’s higher than CPF.
Tax Relief Benefits
- CPF SA
Here’s how the tax relief benefits work when you top-up you or your loved ones’ CPF SA:
| Amount of cash top-up to own or family members’ CPF SA | Maximum allowable relief |
| Below $8,000 | Exact amount of cash top-up |
| $8,000 or more | $8,000 |
Source: IRAS
- SRS
Each dollar contributed to your SRS account results in a dollar-for-dollar tax deduction.
Here’s an example to illustrate how SRS can bring about tax savings:
In this example, a person pays tax on $64,700 after personal reliefs and a reduction in taxable income from the contribution $15,300 to their SRS account, a stark difference from paying tax on their original employment income of $120,000.
| Looking for ways to reduce your income tax? Check out our guide on income tax relief options that you can consider exploring as tax season approaches. |
Interest Rates
- CPF SA
Your CPF SA account earns a guaranteed interest rate of 4.14% per year*.
For CPF members below 55, your interest rate grows to 5% if you have a combined balance of $60,000 in your OA and SA accounts. Those above 55 will earn up to 6% on the first $30,000.
It’s important to note that 4.14% is a special rate announced by the government this year and is valid till 31 December 2024, and that this number may or may not change when 2025 rolls around.
- SRS
Money in your SRS account earns only 0.05% per year, and that’s why most people turn to investing their SRS funds to maximise their returns.
There’s a variety of SRS-approved investment options you can choose from, including stocks, bonds, Singapore Savings Bonds, unit trusts, and ETFs. We’ll talk more about this below.
Withdrawal Rules
- CPF SA
Since money in your CPF SA is meant for your retirement, the government has imposed stricter rules regarding the withdrawal of these funds.
No withdrawals can be made before you turn 55. Thereafter, certain rules still apply should you decide to take out funds from your account.
- SRS
SRS gives you more flexibility.
Unlike your CPF SA, you can withdraw the funds at any time. However, there’s a penalty for early withdrawals made before the statutory retirement age (63 effective from 1 Jul 2022).
For any withdrawals made before you turn 63, you’ll incur a 5% penalty and the amount you withdraw will be taxed.
The penalty is waived for any withdrawals made after 63, but the amount will still be taxed, although the government grants a 50% tax concession for such withdrawals (i.e. only 50% of the withdrawal is subject to tax).
Use of Funds
- CPF SA
Funds in your CPF SA are largely used for retirement.
However, if you have at least $40,000 in your SA and would like to augment your savings, you can also choose to invest your SA funds under the CPF Investment Scheme-Special Account (CPFIS-SA).
Investments made must be endorsed by the CPF Board and fall under the list of CPF-approved investment options. The pool of unit trusts eligible for CPFIS-SA is relatively small, and most are bond-focused.
- SRS
As mentioned earlier, most people try to maximise their SRS funds by investing it across a range of investment options like stocks, ETFs, fixed deposits, and more.
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Which Account Should You Top Up: CPF or SRS SA?
Now that we know the differences, the next question is: which account should you top up?
It really depends on your financial situation, goals, and risk appetite. Here’s a simple breakdown of who should consider topping up each account:
Top Up CPF SA if:
- You want guaranteed, safe returns
The CPF SA offers a risk-free, government-backed interest rate. If you prefer stability and are looking for a “hands-off” approach to saving for retirement, CPF is a solid choice.
- You’re comfortable locking your funds for the long haul
CPF SA top-ups are irreversible, so it’s crucial to prioritise your financial needs first. Plan carefully to ensure you’re prepared for future expenses like housing upgrades and your children’s education.
Top Up SRS if:
- You want to invest for potentially higher returns
SRS offers a wider range of investment options, from blue chip stocks to ETFs. If you’re comfortable with investment risk and want to grow your savings at a faster rate (albeit with potential ups and downs), SRS could be the way to go.
- You need more flexibility
While the CPF SA is locked in for a specific set of purposes, SRS gives you more freedom to manage the funds as you see fit.
If you want flexibility in your savings and are comfortable with the penalties associated with early withdrawal, SRS gives you more control over your retirement savings.
Which One Should You Choose?
If you’re someone who values security and is primarily focused on guaranteed growth for your retirement and housing, CPF is the safer bet since it’s government-backed and easy to manage.
If you’re aiming to reduce your taxes and are open to taking on a bit more investment risk for potentially higher returns, SRS might be more suitable.
It’s ideal for those who are comfortable with a long-term investment strategy and want more flexibility with their funds.
For many people, a combination of both works well!
Think of retirement planning like a soccer match. You need a strong defense and a powerful offense to win. CPF SA top-ups can act as the defense, building a secure foundation for your retirement, while SRS top-ups can serve as the offense, providing opportunities for growth and flexibility to achieve your financial goals.
Given the potential of SRS to enhance your retirement savings and its attractive tax benefits, why not contribute to CPF for the guaranteed, secure savings, and top up your SRS to benefit from the tax relief and investment potential?
Ultimately, the right choice depends on your financial goals, risk tolerance, and how much flexibility you need with your savings.
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