It has been 5 years since Singapore Savings Bonds(SSB) was introduced. Over the years it has gained popularity among retail investors seeking better returns while exposing themselves to minimal risk. However, the average return of the bond has been decreasing over the years. In fact, due to poor economic conditions, Oct 2020 SSB Bonds is at 0.91% p.a. compared to the average of around 2% p.a. With that, is investing in SSB a wise choice?
What are Singapore Savings Bonds?
SSB is a type of Singapore Government Securities issued by the Monetary Authority of Singapore on behalf of the Singapore Governments. The aim of SSB is to provide long term savings options that offer safe returns for Singaporeans above 18 years old who can and wish to save more.
Every month, new SSBs will be issued. The application period opens at 6pm on the 1st business day of the month and closes at 9pm on the 4th business day of the month. For more information on the dates, you can check it out on the Savings Bonds Website.
The investment term for SSB is 10 years though you can redeem it early without penalty. Over the 10 years, you will receive interest payments every 6 months on the 1st business day of the month into your bank account. (You will receive lesser interest at the start, however the longer you hold, the interest will increase over time )
Why should you buy
1.Very Safe
SSBs are backed by the Singapore Government which has a strong credit rating by multiple credit rating agencies like Moody's and S&P. Besides, you can always redeem your bonds at any time in exchange for the amount you invested. Meaning you will not have any capital losses.
2.High liquidity
Unlike a fixed deposit that required you to hold your funds for a period of time without withdrawal, you can redeem your SSB at any point in time if you require the money. ($2 redemption fees applies)
3. Low starting capital
If you are interested in SSB, you can start from as low as $500. This is the minimum investment amount. Subsequent additional must be in multiples of $500. (Each investor may hold a maximum of $200,000 SSBs at any one time)
Why you should not buy
1. Low returns
As compared to the stock markets, the SSB interest rate is relatively low. As such there will be some opportunity cost if you deploy your money in SSB instead. Additionally, with the rise of Insurance Savings Account like Singlife, the current 1% interest return is not that attractive compared to Singlife's 2%
2. Low initial interest rate
SSB offers you a return that depends on how long you hold them for. As such, if you were to redeem earlier, the return will be even lower than if you held for the full term.
How to buy SSB
SSB can be either bought with cash or by using your supplementary retirement scheme (SRS).
Before you start your applications, for cash applications, you will need a bank account with DBS/POSB, OCBC, or UOB and an individual CDP Securities account with direct crediting service activated. For SRS applications, you will need an SRS account which can be opened with the banks mentioned above.
Applying via ATM (For Cash)
- Insert your ATM card and enter your PIN
- On your screen select 'Invest' or 'Investment'
- Next, select Singapore 'Government Securities' or 'Investment services'
- Select 'Invest in Singapore Savings Bonds'
- Read and accept the terms and conditions
- Confirm your CDP account details and the amount you wish to debit
- Confirm your transaction
The money will be deducted from the bank account tied to your ATM card or selected internet banking account. A non-refundable $2 transaction fee will be charged by the bank for each application.
Applying via Internet banking (For Cash or SRS account)
- Log in to your internet banking
- Locate 'Invest' or 'Investment'
- Select 'Singapore Savings Bonds'
- Select 'Cash' or "SRS'
- Enter and confirm your CDP/SRS account details
- Confirm your applications
A non-refundable $2 transaction fee will be charged by the bank for each application.
Wait for results
The new SSBs will be issued on the 1st business day of the following month. If you invested using cash, you will be notified by CDP via mail of the amount of SSB allotted to you. If you invested using SRS funds, you will be notified by your SRS operator via mail of the amount of SSB allotted to you.
Alternatively, you can check the My Savings Bonds portal to check all your SSB holdings
Receive Interest returns
After 6 months, from the issued SSBs, you will receive your first interest payment into your bank account that was linked to your CDP account.
Opinion
Unless SSB interest rate returns back to its gloriest day, with the current low-interest environment, I think it is better if you were to put your money elsewhere that can yield higher returns. Some options include Insurance Savings Plans like Singlife or even Robo-advisors like StashAway that offers money market fund.
For more FAQ on Singapore Savings Bonds, you can refer here.
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