Smart Srs Investment Strategies For Your Future

The Supplementary Retirement Scheme (SRS) is a voluntary government scheme that helps Singaporeans enjoy tax relief while saving for retirement. The low interest rate of 0.05% per annum on non-invested SRS funds is insufficient to keep pace with inflation, so it's crucial to invest your SRS funds to make the most of your savings. There are various investment options available, including unit trusts, ETFs, stocks, bonds, annuities, and insurance products. These options offer higher returns and help build a robust retirement portfolio. A diversified investment strategy can mitigate risks and ensure your funds grow steadily over time, which aligns with the long-term objective of the SRS.

Endowment Insurance Plans

Endowment plans are a savings/insurance hybrid product, often recommended as a way to save for your child's education, your retirement, or other fixed milestones. Endowment plans are usually offered as part of whole life insurance plans, which cover you until the end of your life. Endowment policies can be beneficial in helping you build financial discipline, as the savings component is built into the monthly insurance premiums.

• Endowment plans are more expensive than other types of insurance like health insurance and term insurance.
• Endowment plans can be a good way to build financial discipline, as the savings component is built into the monthly insurance premiums.
• The coverage provided by endowment policies is usually extensive, covering death, terminal illness, and sometimes total and permanent disability, up until the end of your life.
• Endowment plans can provide guaranteed sums of cash payouts and also offer non-guaranteed bonuses.
• Endowment plans can be a good investment opportunity, as the savings component can be invested in various funds.
• Endowment plans may have lower yields compared to investment-linked plans (ILPs).
• Endowment plans are a longer-term commitment, usually covering you until the end of your life.

AIA Guaranteed Protect Plus III

AIA offers a whole life insurance plan with an endowment policy component that covers death, total and permanent disability (up to age 70), and critical illness (optional, up to age 100). There is also an add-on option to increase your lump-sum payout if your children or other dependents are still financially reliant on you.

AXA Life Treasure

AXA Life Treasure is a flexible endowment plan offering guaranteed cash payouts and coverage for death and terminal illness up to 24 years old. There are four endowment policy plans to choose from, with policy terms ranging from 15 to 24 years. You will receive an annual guaranteed cash payout of up to 5.50% of the sum assured.

China Taiping I-Secure

China Taiping I-Secure is a whole life insurance plan with an endowment plan that offers a guaranteed lifetime benefit of up to four times the basic sum assured for death and critical illnesses. They offer premium payment terms ranging from 5 to 25 years, with optional riders covering up to 161 medical conditions.

Income's Gro Power Saver

Income's Gro Power Saver is a 10-year endowment plan where you pay premiums for only the first three years of the policy. In the event of death or terminal illness, you will be entitled to receive 105% of all net premiums paid and 100% of bonuses.

Manulife Goal 10

Manulife Goal 10 is a two-year, single-premium endowment plan that guarantees a return of your capital upon policy maturity. It covers death at 101% of your single premium and offers a guaranteed return of 3.39% upon policy maturity.

Singlife Choice Saver

Singlife Choice Saver offers a range of premium payment terms and policy terms to choose from. It guarantees 100% of your capital if you hold the policy until maturity. While there is no option for early cash withdrawal, you may be able to earn potential bonuses upon maturity.

GREAT Prime Rewards 3

This endowment plan from Great Eastern offers guaranteed yearly payouts and a lump-sum benefit upon completion of the policy term, death, terminal illness, or total and permanent disability. You can choose to receive payouts in cash or through your CPF Supplementary Retirement Scheme (SRS) funds.

Tokio Marine Nest Egg (GIO Cashback)

Tokio Marine Nest Egg offers guaranteed acceptance and guaranteed capital if held to maturity. It provides a range of premium payment terms, including a short five-year term. It offers guaranteed yearly cash benefits from the second policy year and also provides coverage against death.

DBS SavvyEndowment 18, Limited Tranche

This endowment plan from DBS offers guaranteed returns of 2.50% per annum for three years.

Manulife Spring (II)

Manulife Spring (II) is a 12-year endowment plan that helps grow your savings to meet your life goals.

Manulife Goal 2024 (IV)

Manulife Goal 2024 (IV) is a three-year single premium endowment plan with a limited tranche available. It offers a guaranteed yield of 2.50% per annum.

Unit Trusts

• Diversification: Unit trusts allow investors to diversify their investments across different sectors, geographical regions, and asset classes, reducing the risk associated with investing in a single company or industry.
• Professional management: Fund managers use their expertise and research to select investments for the fund, providing investors with access to well-managed and diversified portfolios.
• Affordability: Unit trusts typically have low minimum investment requirements, making them accessible to a wide range of investors.
• Flexibility: Investors can buy or sell units at any time, providing flexibility in terms of investment tenure and withdrawal.

However, it is important to consider the fees associated with unit trusts, such as management fees and sales charges, which can impact overall investment returns.

When investing in unit trusts with your SRS funds, it is important to consider your risk tolerance and investment goals. While unit trusts may carry higher risks than some other investment options, they have historically provided better long-term returns, outpacing inflation. It is also crucial to invest your SRS funds rather than leaving them idle, as the low interest rate on SRS accounts is often insufficient to keep up with inflation.

In summary, unit trusts are a popular and accessible investment option for SRS funds, offering diversification and professional management. However, investors should carefully consider their risk tolerance and investment goals and be mindful of the associated fees when investing in unit trusts.

Stocks or ETFs

Stocks and REITs are a good investment option for those with an SRS account. However, they are not recommended for those without much investing experience. For those who are new to investing, ETFs and unit trusts are a better option.

Stocks and REITs

Stocks and REITs are a good investment option for those with an SRS account. However, they are not recommended for those without much investing experience. Buying individual stocks and REITs is an easy but difficult way to make money for many retail investors. Stocks and REITs are subject to corporate actions, which can be complicated when investing with SRS funds. For example, if a company issues rights, you will need to top up to prevent your shares from being diluted, but you may not have enough SRS balance or may have reached the maximum yearly contribution.

If you are still interested in investing in stocks, there are some options available, such as the OCBC Blue Chip Investment Plan and the Phillip Share Builders Plan. Some brokers will handle corporate actions for you, but be sure to check the terms of each investment account. It is also important to note that brokerage fees are typically not attractive for small investment accounts.

ETFs and Unit Trusts

If you don't have the time to do extensive research on individual stocks, investing in ETFs and unit trusts could be a more suitable approach. ETFs tend to track a passive index and charge lower fees than unit trusts. For example, ETF managers such as Nikko Asset Management usually charge fees below 1% per annum. As a result, investors seeking a lower-cost approach may prefer ETFs over unit trusts.

Unit trusts, on the other hand, tend to be actively managed, with fund managers seeking to outperform the index. Consequently, most unit trusts charge higher fees, and you often have to buy them through banks or financial advisors, which typically incur a one-off sales charge and/or redemption charges as high as 5%. However, with the rise of disruptive robo-advisory platforms such as MoneyOwl and EndowUs, lower-cost unit trusts are now more accessible.

Final Thoughts

There is no one-size-fits-all approach to investing for retirement. It is important to consider your risk tolerance and financial goals before making any investments. Additionally, it is recommended to adopt a disciplined and long-term approach, choosing investments that meet your specific risk-return objectives.

Singapore Government Securities

There are two types of SGS: SGS Bonds and Treasury Bills (T-bills). SGS Bonds pay a fixed coupon every six months and have longer maturity periods, ranging from 2 to 50 years. On the other hand, T-bills are short-term bonds issued at a discount to their face value, with the interest being the difference between the purchase price and the face value received at maturity, which can be either 6 months or 1 year. T-bills are also frequently launched and have seen a surge in popularity in the high-interest-rate environment, with yields consistently above 3% since the latter half of 2022.

Both SGS Bonds and T-bills provide a secure way to diversify your investment portfolio, offering different maturities and interest payment structures to match various investment strategies and goals.

Structured Deposits

When investing in structured deposits, it is important to understand the risks involved, including the possibility of losing some or all of your investment if the underlying financial asset underperforms. Early withdrawal of structured deposits may result in losing part of the return and/or principal, and may attract certain bank charges. Structured deposits are also not insured under the Deposit Insurance Scheme, so if the bank defaults, you could lose your entire investment.

Before investing in structured deposits, it is important to ensure that you are comfortable with the associated risks and that the investment aligns with your financial goals and risk tolerance.

Frequently asked questions