The direct proportion of the cost-of-living and inflation makes it so that money is becoming tighter and tighter as everyday prices continue to grow. This poses a lot of uncertainty for the future, especially for those who wish to retire, with many looking to make investments to supplement their income to make a sufficient–if not comfortable–nest egg.
One such investment made available by the Singapore government is the Singapore Savings Bond (SSB). Originally starting as a conservative, low-return investment, it saw improvements in 2015 that makes it a competitive investment opportunity.
If you are one of the people looking to have an investment early for growing your nest egg, you might have come across the term, but what are Singapore Savings Bonds?
Singapore Savings Bonds (SSB) are a type of Singapore Government Securities–financial products backed by the Singapore government that individual investors can use as a means of growing their money.
As is with the case of bonds, you are lending money to who issued it, and in return, you get interest payments. Because a Singapore Savings Bond/SSB is issued and guaranteed by the government, it’s generally a low-risk investment, unlike other options.
SSBs have an investment period of 10 years that can be withdrawn plus accrued interest at any point with no early redemption fee. However, the highest returns come when they hold their SSBs till full maturity, with a maximum of $200,000.
|Who can apply||Anyone aged 18 and above can buy SSBs|
|Cash applications||You need a bank account with local banks DBS/POSB, OCBC, or UOB, and a CDP account|
|SRS funds applications||You need an SRS account|
|Minimum investment amount||$500. SSBs are sold in multiples of $500, each investment being made in subsequent multiples of $500|
|Maximum investment amount||$200,000 per individual across multiple SSBs since Feb 2019.|
|Transaction fee||$2 per application request for a new bond and each sale.|
|Interest payments||Every 6 months. Note that you won’t earn interest on your interest (no compound interest), because interest is paid out.|
|Risk factor||Virtually zero. Guaranteed by the government.|
|Taxation||SSBs are exempt from tax|
Unlike other investments, Singapore Saving Bonds are more like fixed deposits or savings accounts in that interest returns are small. But it does have one characteristic that serves as its main draw–safety.
Investing in the Singapore Savings Bond is good for instances where you want to grow your money with a low-risk appetite, or if you want to balance out the higher-risk products in your investment portfolio.
It’s also a great option if you just want to save some money somewhere–say some excess cash–for a long period. Instead of placing it in a bank account, you can put it in Singapore Savings Bonds especially if you don’t plan to touch it for a long time.
While the interest rates will only become competitive at around the 5th year and you can get the full benefit when it reaches the maturity date after 10 years, you can ostensibly make it work harder in savings bonds than in a bank account.
Now it’s time to discuss the catch–SSB interest rates. If you’ve ever heard of safety being aligned with boredom, then it’s going to be about the same for the current rate of Singapore Savings Bonds.
SSBs and other Singapore government securities aren’t known for high-interest returns, but there was a point where SSBs broke the 2% annual interest return ceiling in 2018.
|Bond Code||Issue date||Maturity date||Average p.a. return at Year 10|
|GX21080A||1 August 2021||1 August 2031||1.50%|
|GX21070X||1 July 2021||1 July 2031||1.53%|
|GX21060Z||1 June 2021||1 June 2031||1.61%|
|GX21050V||3 May 2021||1 May 2031||1.56%|
|GX21040T||1 April 2021||1 April 2031||1.15%|
|GX21030F||1 March 2021||1 March 2031||0.97%|
|GX21020N||1 February 2021||1 February 2031||0.89%|
|GX21010H||4 January 2021||1 January 2031||0.90%|
While there was an upward spike in June, there are the beginnings of a downward trend, with this year having an average return rate of 1.50%.
On the bright side, new SSBs are offered each month with changing interest payment rates, so there is a chance of an increase.
You need a bank account with any of these three local banks: DBS/POSB, OCBC, or UOB. You can open one online or do so in person by visiting any branch within the country.
You also need to open an individual CDP account with Direct Crediting Service activated so that interest payments can be credited directly to your bank account. This allows interest payments from your Savings Bonds to be automatically credited to your bank account.
In this case, CDP is the custodian for Savings Bonds bought with cash. It will process applications, interest payments and redemptions.
If you don’t already have an SRS account, visit any of the three SRS operators: DBS/POSB, OCBC, UOB to open one.
In this case, your SRS operator is the custodian for Savings Bonds bought with SRS funds.
You can apply through the online banking website of your bank, ATMs, and OCBC’s mobile application. You have to prepare your CDP account number and the amount you have to invest.
The money will be deducted from the bank account tied to your ATM card or selected internet banking account along with a $2 transaction fee at the point of application.
Apply through the internet banking portal of your SRS operator. SRS funds will be locked or earmarked, when you apply. You will be charged $2 as a transaction fee.
- You cannot apply for Savings Bonds in person at the bank counters.
- You may need to print out the application form and mail it with supporting documents.
- Once submitted, application requests cannot be amended or cancelled.
- The application period usually lasts three weeks.
After the application period, you will have to wait until “allotment day” or the 3rd last business day of On that day, the application results will be available on the Monetary Authority of Singapore website after 3 pm.
Savings Bonds will be issued on the 1st business day of the following month. Depending on whether you invested with cash or SRS funds, you will be notified by your operator via mil regarding the amount of Singapore Savings Bonds allotted to you.
You can also check your holdings online through:
- The CDP internet service or by calling CDP at 6535-7511.
- Through your SRS operator
- Log in to the My Savings Bonds portal
Your first interest payment will be automatically paid to either your SRS or CDP account, depending on what you used to apply, 6 months after the issue date.
The next scheduled interest payment will arrive 6 months after that on the first business day of the month, and so on until the maturity date.
- Virtually risk-free. The bond is backed by the Singapore government, with a good risk-return ratio.
- High liquidity. Your investments are available for withdrawal at any point in time.
- No lock-in period. How long you want to invest is up to you.
- Payout step-up interest rates. SSB interest rates grow every year until the 10th year.
- Regular payouts. You get regular interest payments every 6 months, which synergizes well with increasing interest returns.
- Purchasable with SRS funds. You can grow the money in your Supplementary Retirement Scheme account directly.
- Comparatively low returns. Singapore Savings Bonds returns are subpar compared to investments like funds or stocks.
- Limited amount of investment. SSBs have an individual limit of $200,000.
- Non-transferrable. cannot be traded or pledged as collateral.
The biggest selling point of SSBs is the fact that government guarantee makes it incredibly low-risk. This is because the Singapore Government has a “AAA” credit rating. International credit rating agencies have given this grade to only 11 countries in the world.
The following is the projected returns based on the coming August 2021 interest rates:
|Year from issue date||interest rate||Average return per year in per cent|
The latest Singapore Savings Bond 1.5% p.a. return rate remains considerably low compared to the rates back in 2019. However, this rate in a low-interest-rate environment is relatively competitive against most savings accounts and insurance savings plans, making it a viable option for investment.
Because Singapore Savings Bonds are currently at low points, it’s a good idea to take steps to maximise your returns. There are two ways to do this, taking advantage of the fact that Singapore Savings Bonds are offered every month, and that its interest rates climb each year.
Each tranche of SSBs are issued arrive each month with its rate, meaning that the return rate also varies between each month.
Because of the stability of SSBs, you can divide your funds to buy different tranches of SSBs instead of making a lump-sum investment on a single tranche with low returns. This opens up the opportunity of buying SSBs with higher returns to balance out the other ones.
As discussed, the returns are lowest during the first year of a Singapore Savings Bond. Returns are at their lowest in the first year but will increase by the tenth year, so it is best to hold the principal and accrued interest until maturity.
We mentioned earlier that you can’t sell an SSB. That’s because it’s technically more of redeeming instead of selling.
You can redeem your SSB any month before the full 10-year maturity and do so with no penalty for early redemption; otherwise, all of the money will go into your chosen account at the end of that time.
Here is what happens at each stage when you redeem:
|When||What to do||What you get|
|During a scheduled interest payment||Submit a redemption request and pay a $2 transaction fee.||Principal and full interest|
|Between scheduled payments||Submit a redemption request and pay a $2 transaction fee.||Principal and pro-rated interest|
|Full term||Pay a $2 transaction fee. No redemption request is required.||Principal and accrued interest|
- For early redemptions, the requests are sent through one of the aforementioned banks (through ATM or iBanking). You can redeem the bond partially as long as it is in multiples of $500.
- If you have more than one bond, you can redeem many at the same time.
- The amount will arrive in your account the following month when you redeem your SSB.
Bonds are fixed-income investments where an investor loans money to an entity. In essence, you are loaning money to the government or business so they can fund and maintain projects, and the like.
In this case, you are the bondholder, and the borrower is the one who issues the bonds. When a bond is issued, it includes the terms of the loan, the coupon rate (the equivalent of interest rates for bonds), and its date of maturity, when the money you lent is given back to you.
As with all fixed-income investments, your returns are paid on a fixed schedule.
|Issuer||Businesses registered on the Stock Exchange||Investment houses that buy into different products like stocks, bonds, commodities, and other investments||Mostly governments or government-related entities. Private entities like banks may also issue bonds.|
|Investment risk||High Risk||Moderate Risk||Low Risk|
|Returns||Returns can be volatile||Only when conditions are fulfilled||Commonly issuer-guaranteed|
|How they work||You buy stocks (shares) from a company, which is subject to changes in price as per changes in the market. Profit is made when you sell when shares are priced higher.||An example is exchange-traded funds, where buying one fund gives you different investment products. Because there are multiple products in a fund, changes in the market will have less effect on your profit.||No buying & selling involved like stocks or funds. You receive returns regularly and receive the principal upon the end of the investment tenure. Some bonds may also pay dividends over the investment tenure.|
If you are looking for other low-risk investment options, here are a few you can choose from:
Similar to SSBs, fixed deposits are minimal risk investments that involve pledging a fixed amount for a fixed tenure. The difference is a fixed deposit investment has no ceiling–you can pledge as large as you want, and often you can get promotional coupon rates as high as 0.75% (often for a limited time, like 24 months).
There is a risk of penalty for early redemption, the rate will remain constant, and there may be a minimum amount required to invest before getting ideal rates.
Another low-risk option. It involves having your money saved with a bank that gives you high-interest returns.
The benefit is unlike SSBs and fixed deposits, it has total interest returns, and your money grows for each day it is in the account, which you can take out at any time.
The rates however are subject to volatility, and there are multiple criteria before you can get a high-interest rate.
As discussed earlier, ETFs are another considerably low-risk option, which involves working with investment houses and investing in a fund.
Funds are a collection of different products, and this diversity makes them comparatively safer than stocks but riskier than SSBs.
SSBs and SGS bonds are largely similar, with a few key differences.
|Investment Duration||10 years||2, 5, 10, 15, 20 or 30 years|
|Min. to Invest||$500||$1,000|
|Application||Application through a bank with cash or SRS||Through auction|
To learn more about SGS bonds, visit the MAS website here.
3. Can I use CPF Special Account to buy SSBs?
Your CPF funds unfortunately cannot be used to purchase SSBs.
Despite the low rates, Singapore Savings Bonds remain a viable choice for when you want to grow your savings with a very small amount of risk. However, it’s always better to review your different options and consult experts so you can find the best investment choice possible.
Sometimes, investment opportunities pop up but you have no cash on hand to make the most of it, and in that case, it might be a good idea to get a loan when there is not much risk but a hefty reward on the investment.
When you’re looking for a loan, check out Loan Advisor. It is a loan comparison site that can help you choose a loan from a curated list of the best lenders in Singapore so you don’t miss a good investment opportunity.