This is the most comprehensive guide to Singapore Savings Bonds (SSB) you can ever find on the web. We have included reviews, latest interest rate, investment strategies and step-by-step walkthrough on how to buy that you will find it useful.
The upcoming 1 Feb 2019 SSB offers an average 10 years interest rate of 2.20% (source) with a minimum investment of $500 per bond, which is the highest since its inception in 2015.
What Are Singapore Savings Bonds?
Specially structured government securities that were designed to be accessible and suitable for the individual investors.
That sounds complicated.
Here's a simple cheat code. Every time you see the word 'Bond', take it as 'Fixed Deposit'.
What are they exactly? Every time the government issues a bond - and when you buy one - it means you're lending the government money. In return, they give you a small interest rate (more on this later) on the money you've lent to them.
Think of it being like a one man bank to the Singapore Government. Except in this case, you're not the only 'bank'. Everyone with money can chip in.
Launched by the Monetary Authority of Singapore (MAS) in October, 2015, a new Singapore
Fixed Deposit will be issued every month for at least the 5 years after its launch.
The aim of the Government is to give investors access to long-term interest rate returns with maximum flexibility at zero risk.
Here are three quick-facts to learn about SSB:
A government bond designed to help Singaporean investors to save and invest for the long term
They are safe, principal-guaranteed investments backed by the triple A credit rating of the Singapore Government. That means zero risk. Unless the government goes bankrupt overnight.
The SSB have two unique features:
Here's a quick video summary of the key features of Singapore Savings Bonds:
Why You Should Invest in Singapore Savings Bonds?
The unique selling point about the SSB is its flexibility. Unlike conventional bonds where investors receive the short end of the stick if they redeem the bonds early, the SSB has no lock-in restrictions.
Although each SSB has a maturity term of 10 years, you can redeem your bonds at any time before maturity.
Even if you redeem the bond early, you still get to keep the interest paid out at six-monthly intervals.
How Long Should You Invest?
That’s really up to you.
The bond tenor is 10 years, but because you can get your money back at any time with no penalty, you do not have to decide about the duration of your investment upfront.
Obviously, the longer you invest, the better the yield. The question is, do you have the patience to sit on your SSB for the full 10 years?
SSB Interest Rate: How Much Can You Earn?
Interest on the SSB will be linked to long-term SGS rates.
This means that the average interest you receive over the period you hold the SSB will match what you would have received had you bought an SGS bond of equivalent tenor.
The key difference is, while SGS bonds pay the same interest every year, the SSB offer “step-up” rates, meaning that interest payment will increase the longer you hold your bonds.
Just to give you an idea of how much to expect: the 10-year SGS has mostly yielded between to 2 to 3% over the past 10 years, with the current yield being 2.4%.
Assuming a S$10,000 investment, this gives an average interest of $240 a year or $20 a month, over 10 years.
Financial adviser Wilfred Ling has done an interesting analysis on the projected yield percentages, arguing that the realised return for the SSB is actually slightly lower than that for the SGS.
If we go according to his figures, here’s how much your investments would work out to over the long run.
If you think about it, the SSB’s interest rates aren’t bad, if you’re a conservative investor.
Sure, they’re lower than that of long-term CPF funds, but at least they’re higher than that of short-term fixed deposits and savings accounts.
If you’re looking for somewhere to park your savings (under $100,000), forget about the banks and go for the SSB instead.
How To Buy & Invest In SSB?
Before you apply
You will need the following to start applying for the Singapore Savings Bonds:
- A bank account and ATM card with one of the participating banks – currently DBS/POSB, OCBC or UOB. (More banks may be included in future)
- An individual (not joint) CDP Securities account with Direct Crediting Service activated. Note that you must be at least 18 years old to open an individual CDP Securities account.
A new SSB will be issued every month for at least the next five years. The application window for each SSB issue will open on the first business day of each months and close four business days before the end of the months.
You can apply through any participating bank’s ATMs, or via DBS/POSB’s internet banking channels. Application requests must be made in multiples of $500. Bank charges may apply.
Note that you can purchase SSB only using cash, at least for the time being. In future, the Government may consider allowing people to use their CPF savings and Supplementary Retirement Scheme (SRS) funds to buy SSB.
How Will I Know If My Application Is Successful?
The success of your application depends on the demand for the SSB in that particular tranche.
The issuance size for each SSB tranche will be announced before application opens. If the demand exceeds the amount on offer in a particular month, MAS will allocate the bonds to maximise the number of successful applicants.
If you read between the lines, you’ll realise this means smaller applications stand a higher chance of being fully allotted.
But fret not – if you did not receive your full allotment, you can always apply again for the next issue. (Although there is little reason to worry about not getting your full allocation…)
If your application is successful, you will be notified by CDP via mail of the amount of SSB credited to your account. Application results will also be announced three business days before the end of the month.
How To Redeem?
The redemption process is similar to the application process – submit your request through any participating bank’s ATMs, or via DBS/POSB’s internet banking channels. You will get your cash (along with any accrued interest) back in the bank account linked to your CDP Securities account.
Do note, however, that redemption proceeds will only be processed by the second business day of the next month.
So don’t invest your entire nest egg in the SSB; you should still keep a portion of emergency funds separately in case you need them urgently.
How Much Can I Invest In The Singapore Savings Bonds?
The minimum sum is $500 and the maximum sum is $100,000. In other words, you can only hold up to $100,000 worth of SSB at any one time. You can top-up in multiples of $500 and apply for up to $50,000 on any single bond issue.
(Note: These figures may be revised in future, pending MAS’s review after the programme has been in place for some time.)
Yes, there is a quota imposed, but it’s a far more generous cap than what many of us were expecting.
This cap should be sufficient to meet the needs of most Singaporeans, as more than 90% of individual bank deposit accounts have balances of $100,000 or lower.
In our opinion, the Singapore Government has created the most perfect financial product ever (for the lazy investor and the non-investor who wants to build their investment portfolio). Such an instrument will never exist in the free market.
Unless you consider the need to activate the Direct Crediting Service in your CDP account as 'work', its like having the option to unlock free returns.
Unfortunately, bonds tend to be highly misunderstood and hence shunned by many investors. Because of that, the take up rate for the Singapore Savings Bond will likely remain low among retail investors in Singapore.
We hope that by changing your perspective, you are able to see that despite the name, the Singapore Savings Bond has more features of a Fixed Deposit rather than a Bond.
And that it isn't as intimidating as it's name.
With that in mind, we hope more will explore and subscribe to the offering.
Co-Founder. Believer of the Factor-based Investing approach. Running a Multi-Factor Portfolio that taps on the Value, Size, Profitability and Momentum Factors. Quant at heart. Believe the financial industry can treat their customers better. Wants to change the world.