Simply Her (Singapore) - - Trulife Special -

– An­drea Kennedy, cer­ti­fied fi­nan­cial plan­ner Forced sav­ings schemes are a con­ve­nient and ef­fec­tive way to save and make money. Here are four you need to know about: SUP­PLE­MEN­TARY RE­TIRE­MENT SCHEME (SRS) WHAT IT IS: SRS is a vol­un­tary tax de­fer­ment sav­ings scheme to en­cour­age peo­ple to put money aside for re­tire­ment, over and above their CPF sav­ings, says Al­fred. You can con­trib­ute var­i­ous amounts up to a cap of $12,750 (for Sin­ga­pore res­i­dents) and $29,750 (for for­eign­ers), a year. The amount you con­trib­ute each year goes to­wards re­duc­ing your charge­able in­come and thus, your tax amount. PROS: What you con­trib­ute to the SRS can be used for a wide range of in­vest­ment prod­ucts such as shares, unit trusts, ex­change-traded funds and real es­tate in­vest­ment trusts. As this is parked in your CPF ac­count, it’s also harder to ac­cess the money. CONS: SRS monies with­drawn be­fore you’re 62 years old are sub­ject to a 5 per cent penalty, on top of be­ing tax­able, says Al­fred. Also, af­ter 62, 50 per cent of monies with­drawn are sub­ject to tax. The scheme al­lows you to with­draw SRS monies over a pe­riod of 10 years, which helps spread out the tax­able amount and, in turn, re­duces the over­all tax payable. EN­DOW­MENT IN­SUR­ANCE PLAN WHAT IT IS: Ideal for peo­ple who don’t like to take huge fi­nan­cial risks, an en­dow­ment in­sur­ance plan can be a good way to save. You sim­ply put money aside ev­ery month and re­ceive your pay­out at the end of the term. PROS: It’s a low-risk way to get mod­er­ate re­turns on your sav­ings. CONS: If you cash out be­fore the term is up, you pay a high penalty. IN­VEST­MENT-LINKED PLAN WHAT IT IS: This is an in­vest­ment plan with in­sur­ance pro­tec­tion, says Al­fred. For ex­am­ple, if you save $1,000 a month, a cer­tain amount will go to­wards pay­ing for the in­sur­ance or mor­tal­ity charges, and the bal­ance is in­vested. PROS: “It’s like a two-in-one or combo sav­ings plan – in­vest­ment plus in­sur­ance,” Al­fred points out. CONS: As you get older, the mor­tal­ity charges go up and this will eat into your re­turns.


This is an in­vest­ment plan you can get through your in­sur­ance com­pany, but with­out the in­sur­ance. If you take a 10-year plan, for ex­am­ple, and make no with­drawals dur­ing that time, you will be re­warded with sub­stan­tial re­turns. PROS: Un­like bank sav­ings schemes that are flex­i­ble, this kind of plan forces you to save and makes it hard for you to ac­cess the money be­fore the end of term. CONS: If you cash out early, the exit charges can be pretty huge, Al­fred warns.

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