It’s nearing the end of the year. I have reminded some friends to contribute to their SRS accounts so that they would qualify for tax relief. Definitely happy to see many friends doing so.
However they soon face another issue. When they were at the banks opening their SRS accounts, they would definitely be hearing sales talk that encourages them to invest in endowment funds which are long term. I always told them to find out more about their options before committing. Yes, it is perfectly fine to leave the money in the account and earn very low interest! Until you know what options you have and which ones are best for you.
Also you do not have purchase products only from the bank that you opened your SRS account with. E.g. if you have opened your SRS account with DBS, you could still purchase financial products from OCBC or UOB or other financial institutions.
According to a brochure downloaded from MOF, we could invest our SRS funds in these assets:
- Shares (e.g. those listed on Singapore exchange)
- Bonds (However, we could not use SRS to buy Singapore Savings Bonds)
- Fixed deposits
Please take the time to read the FAQs as I learnt some new things:
- Apparently we could also use SRS to purchase stocks in other stock exchanges other than those in SGX!! However the only issue lies in whether the product provider could facilitate that. I am definitely going to check with my online broker if they could link up my SRS. I have already done that with a local broker and have been using my SRS to purchase local shares. I will share on this once I find out more in a post in future.
- For insurance products, things seem to get more complicated and restrictive:
- Only single premium products are allowed (including recurrent single premium products, encompassing both annuity and non-annuity plans).
- Life cover (including total and permanent disability benefits) will be capped at 3 times the single premium.
- Plans can allow for a contribution continuation feature/benefit upon disability.
- Other types of life insurance e.g. critical illness, health and long-term care are excluded.
- Trust nomination is not allowed for life insurance products purchased using SRS funds.
I do not know much about insurance, but I understand that most term insurance for life cover are not single premium products. Hence, most of my insurance needs could not be covered by SRS, since critical illness and health and long-term care are excluded (although I wonder why?).
- MAS does not maintain a list of financial institutions offering products under SRS. We have to seek advice from SRS operators and the financial institutions which we are interested to purchase the products from.I have been treating my SRS funds as my investment funds for stocks, as stocks have always been part of my investment plan. How about you? I will check out with some financial institutions and follow up with more posts.
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