Self Employed Citizens (Why Contribute To SRS OVER CPF!)

I work as an adviser and also under the "Self employed" category.

If you are too, then you'd kind of understand the "missed" compulsory contributions by employer to CPF. Hence, our retirement planning has a bigger hole to fill.

To save more for your retirement, there is the SRS contribution and CPF contribution schemes available. While you "catch-up" on building retirement funds, you get tax relief when assessing next year.

CPFSA vs SRS contribution: what's the difference?

CPFSA contribution is via RSTU (retirement sum topping up scheme).

Tax relief is up to $7,000.

SRS contribution on the other hand has tax relief to $15,300. An SRS account opened with DBS/OCBC/UOB.

In summary, this answers common questions you may also have.

As a self-employed, you could use both schemes if you are of a high income bracket to really bring down your chargeable income level.

This could save you taxes and help you catch up with those employed in building up retirement savings.

However, also do also note the max relief cap of $80,000 and that whatever you contribute now is FOR NEXT YEAR"S tax assessment.

Two reasons for you to prioritise SRS contribution over CPF contributions

As a self-employed, you don't have a forced contribution to CPF. Your income is entirely on CASH.

That is where your decision for retirement planning & tax savings come in. These are two reasons to prioritise contribution to SRS over CPF (either through RSTU or VC).

Check video below on CPF concepts if you've questions on them

Reason # 1 for SRS: Flexibility to withdraw to cash anytime unlike CPFSA.

In an extreme case that you meet a great business expansion or property opportunity, you can mobilise more potential cash.

Do note the 5% penalty + having the amounts withdrawn added to that year as income.

Reason #2: SRS also gives you a much wider investment choice.

Very few funds are approved by CPFOA and even fewer by CPFSA.

If markets come crashing down, your SRS savings can be used to buy a large range of equity funds. You can even buy SG listed stocks.

Do check with a professional adviser or the platform if an investment qualifies first before buying.

If you have extra funds for retirement, then top up CPFSA

I have only recently contributed to CPFSA (via RSTU) more in the last few years.

If you see below, many who are my age and working full time employed would have more inside their CPF than this. It may be the same for you.

NOTE: Not much its inside CPFOA. Paying some mortgage by Cash.

There may be "emotional benefits" of knowing you have guaranteed retirement fund via CPFSA that is compounding at 4%.

Personally, I don't think it's too much of a deal.

I like early retirement aka F.I.R.E.

The key reasons why I've contributed ONLY in the last few years to CPFSA is that my tax relief needs are bigger and that my housing needs have stabilised.


Your retirement depends very much on making the right wealth growing choices.

As mentioned above, you've already missed out on the employer fixed contributions to your CPF already. When we have lemons, we make lemonade, agree? =) ...

Hence, make the most of your cash. #selfemployed can have best of both worlds =)!

I've a further idea for you on insurance that may help you.

Again, if you've questions, feel free to drop me an email at josh.tan@promiseland.com.sg

Last updated on March 9th, 2020 at 09:09 pm

Josh Tan Jian Liang (CHFC) Principal Author

REVIEWS: https://theastuteparent.com/josh-tan Practising financial planner with Promiseland Independent Pte Ltd. EXPERIENCE: More than 13years. Josh Tan is a young parent, speaker, author and founder of TheAstuteParent.

Leave a Reply

Your email address will not be published. Required fields are marked *