Your Most Essential Guide of Singapore saving bonds (SSB) in 2019
Among investors, we can all agree that Singapore Savings Bond (SSB) is one of the most common ways to invest your money and get higher returns when compared to bank fixed deposits.
The government launched Singapore savings bonds in 2015 as a substitute bond investment product to Singapore Government Securities SGS bonds.
Since its inception, it has been transformed from being a conservative investment with a meager return to an attractive investment with higher returns.
The popularity of the ssb bonds has soared with more people taking notice with the government increasing issuance size from S$150 million to S$200 million.
In this article, we are going to have an in-depth and detailed discussion on Singapore savings bond review, don’t go anywhere.
What Are Singapore Savings Bonds?
Singapore Savings Bonds are bonds issued by the government via the Monetary Authority of Singapore (MAS).
They are Specially structured securities that are easily accessible and suitable for investors.
Sounds complicated right? In simpler terms when you see bond think of fixed deposit when you purchase a bond you are lending money to the one who issued it and in this case, it’s the Singaporean government.
In return, they will offer you a small interest rate every six months on the money you lent them
The main goal of the bond is to give investors access to long term interest rates, With SSB you are free to choose the length of time you wish to invest without a lock-in period, the maximum amount of time that you can keep your money on bond is 10 years and you will get a high ssb interest.
Quick facts about Singapore government bonds
- It’s a government designed bonds that will assist Singaporean to save and invest their money for an extended period
- The bonds are principal-guaranteed investments supported the triple-A credit rating of the Singapore Government that means there are zero risks involved unless the government goes bankrupt.
- The bonds possess unique features: Investors can get their money any time they want without penalty and investors are also allowed to interest linked to long-term SGS rates.
Singapore Saving Bonds Vs. Fixed Deposit Accounts
We mentioned earlier that Singapore Saving Bonds could be treated as fixed deposits. We are going to delve a little deeper and discuss both the similarities and differences between the two
- Earn Interest
Both SSB and fixed deposits earn interest. For SSB interest rates continue to rise each year that you hold the bond, meaning the longer, you lend the government, the more interest your money will earn on the amount you loaned them.
Interest rates vary
Fixed deposits- Every bank has a varying fixed deposit rate that’s pegged on changes in economic conditions when interest rates are high, and banks will have to offer more interest to attract new clients.
Interest rates payable varies depending on the economy.
SSB- They also have varying interest rates; MAS has announced that interest rates paid for each tranche of SSB will be paid at the beginning of each month.
The payable rate will be based on the corresponding coupon rate derived from the ten years Singapore Government Securities (SGS).
It’s important worth noting that Singapore savings bond interest is always higher than what you will get from commercial banks.
Interest rate is locked in upon commitment
In Fixed Deposits and the Singapore Savings Bonds, commitment is usually rewarded.
Fixed deposits- After you have committed to a fixed deposit, the interest payable is locked regardless of how the interest rates fluctuate.
If you have committed $10,000 to a Fixed Deposit account at a bank at a rate of 2% for five years, in two years, the interest rate reduces to 1%.
Your deposit will still earn you 2% as it was the agreed amount at the beginning; there is no change to your returns.
SSB- It also works the same way as fixed deposits; for example, you purchase $10,000 worth of SSB at 3% after a while interest rates fall to 1% mark.
Despite the fluctuations, you SSB holding will pay you 3% if you hold the SSB till maturity. Holders of the bonds will not be affected by the fluctuations.
The bank which holds your account backs fixed deposits- The deposits, its value is not dependent on the current market conditions.
In any case, there is a market crash the bank will provide you with your entire amount in full but if the bank files for bankruptcy then it’s a bit different.
SSB- The capital is capital guaranteed; in Singapore, they are backed by the government. Governments are usually more stable and secure in terms of risks.
If you leave your money with the government stability and security are the key features that they offer.
No Fluctuation in Value
Fixed deposits- The real value of fixed deposits do not fluctuate unlike other traditional bonds, commodities and stocks and the prevailing market conditions do not influence the value of the deposit.
SSB- Singapore government securities do not fluctuate in value, upon maturity you will receive the full amount and the par value is also fully guaranteed at any given time, you will never lose your money when investing.
Early withdrawal penalty
Fixed deposits- All deposits come with tenure, you agreed amount would be kept by the bank of a fixed amount of time.
In case of early withdrawal, there is a penalty payable before the tenure period elapses if you close your account before tenure period elapses, your bank will impose a penalty and will not pay the accrued interest in full.
Depending on the period, the bank may pro-rate your interest payouts according to a pre-determined formula.
SSB- The savings bond also comes with tenure and the maximum length of time is ten years, if you sell you SSB before your tenure is up, you will receive a less amount compared to if you would have waited till maturity.
If you want maximum benefits, you will have to hold your SSB till the end of the maturity date.
Main characteristics of Singapore Savings Bond
Before investing your hard earned money on savings bond, here are some attributes of ssb bonds
- It has a 10-year maturity but can be redeemable any month
- Interest coupons increase with the holding period
- Accrued interest is paid semi-annually
- The SSB is not traded in any exchange
- The Singaporean government fully backs them
- Denominated in units of S$500
Differences between SSB’s and SGS bonds
Noe that we’ve learned the basic concepts of about Singapore government bonds, it’s essential to be able to know and differentiate SSBs and Singapore Government Securities SGS bonds.
SGS bonds have been around for a long time, and they both serve different roles in one portfolio
|Singapore Savings Bonds||SGS Bonds|
|Maturity||Ten years||2, 5, 10, 15, 20, 30 years|
|Eligibility||Individual only||All entities and individuals|
|Interest Rate||Step-up rate, SGS-linked coupon payable semi-annually||Fixed coupon, coupon payable semi-annually|
|Issuance||Monthly||As per issuance calendar|
|Withdrawal||Monthly, no penalty. The full principal amount will be refunded||Subject to prevalent market prices, can be sold at either premium (gain) or discount (loss)|
|Minimum Denomination||SGD 500, in multiples of SGD 500||SGD 1,000, in multiples of SGD 1,000|
|Tradability||Non-tradable||Tradeable through Singapore Exchange (SGX)|
|Coupon||Increasing yield||Constant yield|
Why Should You Invest in Singapore Savings Bonds?
The main attractive selling point of SSB is its flexibility, unlike traditional bonds where investors are punished for redeeming their bonds before tenure period elapses.
The Savings bond has no lock-in limitations.
The savings bond is backed by the Singaporean government and has strong credit rating by international credit rating agencies, including Moody’s, S&P and Fitch.
The Singapore Savings Bonds is risk-free, but this does not mean that you will not have to worry about disruptions in the payment of interest rates or capital loss
Allows diversification of investment portfolio
The savings bond is primarily a government issued bond; thus you can diversify your investment portfolio even if it’s just made up of stock and bonds issued.
They are widely regarded as “Singapore Savings Bonds,” they have a high level of liquidity meaning you can withdraw your investment any time without being penalized.
The bonds enable you to have high-interest rates that can be withdrawn to cover for any emergency.
However, compared to the savings account they have lower liquidity but offers higher interest rates.
The fixed deposits impose penalties for earlier withdrawal hence the savings bonds trumps fixed deposits
You can invest as little as $500
Regardless of your financial muscle, you can invest in Singapore government bonds from as low as $500.
In stark contrast, corporate bonds require huge financial commitments going as high as $100,000 or even $250,000, and Even other Singapore Government Securities still require investment amounts starting from $1,000.
Regular interest payments
Even if you withdraw your money before the elapsing of the tenure period, you will still get interest rates every six months. With the SSB, you have visible cash flows.
The Singapore savings bond have high-interest rates, and they offer more than what CPF OA would pay us over ten years and keep in mind there are no lockup savings.
Also read: Ultimate Guide to BSD & ABSD In Singapore
How Long Should You Invest?
Well, the investment period is really up to you; the bond comes with a 10-year tenure period.
The fact that you can pull your money out any time before the elapse of the tenure period and with no penalties you don’t have to decide on investment duration immediately.
Although, it’s important to note the longer the investment period, the higher the yields.
The real question lies in If you are patient enough to wait for your SSB to mature in 10 years?
Singapore Savings Bonds Interest Rate: How Much Can You Earn?
The main reason why we invest in SSB is for its high-interest rates; we all want to know what’s the return are when we buy SSB.
Interest rates on savings bind are linked to long-term SGS rates, which means the interest you’ll receive on savings bond will match what you’ll have received on SGS bond of the equivalent tenor.
The main difference between the two is SGS bonds pay the same interest rates every year while SSB offers “step-up” which essentially means interest payment increases the longer you keep your bonds.
Each investor should note that there are two sets of numbers: Interest rate and average return per year.
The ssb interest rates step up every year in year one you get 1.68%, year two it is 2.14% and so on
If you withdraw your money after year 2, the actual return from your investment will average (1.68%+ 2.14% divided by 2) which is 1.91% per year.
Let’s assume your average investment is S$20,000, the average interest is $480 per year or $40 a month, over a period ten years.
We will illustrate interest rates of January 2019 bond and calculate the amount of interest you can get from $10,000 investment.
|Tenure||Average interest per year||Total interest on $10,000 principal amount|
New interest rates are issued every month; in recent months the rates have been pretty decent especially those with short tenures.
In Singapore, the rates are revised regularly meaning higher short term yields that are hugely beneficial to investors looking for huge returns in a short period.
Demand for Singapore Savings Bonds has tremendously increased, and the MAS as from Feb 2019 made changes to the policy
- $50,000 issue limit for each issuance of Singapore Savings Bonds but retained at $100,000 for individual limit
- Increased issuance size from S$150 million to S$200 million
In the past investors had to commit to a long-term with Singapore Government bonds due to the short term interest rates being unfavorable and weren’t competitive enough to beat other investment product like fixed deposits.
Today, the investment rates are revised regularly meaning you can earn significant short term yields.
In Singapore, it’s very difficult to find an investment product to find with zero-risk savings that can match Singapore savings bond interest and also provide stability for the long term.
Pros of Singapore Savings bond
- Flexible withdrawal- You can redeem your bond any time without incurring a penalty
- Step-up interest- Interest rate increases over time depending on how long you hold it
- SSB has no commissions payable
- Requires Small minimum amount of $500
- The government guarantees the principle
- The savings bond has a limit of how much you can purchase, the limit of $100,000
- It is only restricted to individuals
- The interest rates for each particular issuance are locked-in; these will be a hindrance in a rising interest rate environment.
- Investors cannot compound the interest payments
How to buy Singapore Savings Bonds
Before purchasing Singapore Savings Bond, here are a few crucial aspects that you should be aware of
|Factor||What you need to know|
|Eligibility||Anyone who is aged 18 years and above|
|Minimum amount||$500, the savings bond is usually sold in multiples of $500|
|Maximum amount||$100,000 per individual across all SSB’s, Cap was raised to $200,000|
|Transaction fee||$2 per transaction every time you buy or sell|
|Interest payment||Every six months, there is no compound interest|
|Risk factor||Principal is guaranteed by the government|
|Ownership||Savings bonds cannot be bought or sold like shares or transferred|
|Taxation,||Singapore government bonds, are exempted from taxation|
Now that we know all the basics, below is a simple 4-step guide of how you can purchase your first Singapore Savings Bond
Step 1: What We Need Before Applying
Before you can invest in Singapore savings bond, it is mandatory that you have a bank account with one of the three local banks in Singapore- DBS/POSB, OCBC or UOB
You will also need to have a CDP Securities account that’s connected to linked to our bank account through direct crediting service (DCS) allowing you to buy savings bond via your ATM and will be in turn stored in CDP account.
The CDP also processes applications, redemptions of Singapore Savings Bonds investments and interest payments.
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Step 2: Apply Via ATMs or Internet Banking
After finishing step one you can apply for issues of subsequent Singapore Savings Bonds via ATMs or internet banking services of DBS/POSB, OCBC or UOB and you require to have your CDP account number on hand.
Once you have finished applying funds will be automatically deducted from your account, application requests must be made in multiples of $500.
The application time frame allowed by the government as from 6 pm on the 1st business day of the month to 9 pm on the 4th last business day of the month for every Singapore Savings Bonds issue.
Once you apply, there is a $2 non-refundable transaction fee that applies to your application; the fee will apply for both application and withdrawal
Step 3: Check for your savings bond allotment
In Singapore, 3rd last business day of the month MAS issues new allocation of Singapore Savings Bonds for those who have successfully applied.
In rare cases where there is an oversubscription, you may receive less Singapore Saving Bonds than what you had initially applied for.
The Singaporean savings bond are always issued on the 1st business day of the following month, and if your application were successful, you would be notified via e-mail the amount of Singapore Savings Bonds allotted to you.
You can also verify the amount allotted on CDP Internet service online platform, and you can also call CDP through 65357511.
Step 4: Get Interest Returns
After six months, you will receive your first interest payment on your Singapore Savings Bond that will be automatically wired into your bank account, and you will continue receiving the interest payment every six months onwards.
How to Know If My Application Is Successful?
The success of your application is dependent on the demand of the SSB in that particular tranche, issuance amount for each SSB tranche are usually announced before the application opens.
If the demand exceeds the amount offered, the MAS will allocate bonds to maximize the number of successful applications.
If your application is successful, you’ll receive a notification from CDP via e-mail of the amount of SSB that’s credited to your account.
Results of the application are three business days before the end of the month.
How to sell (redeem) Singapore Savings Bonds
The redemption procedure is the same as the application process; SSB’s can be redeemed any month before the maturity date.
All you need to do is submit your request through your banks ATM or via DBS/POSB’s internet banking channels, and you will get your cash plus the accrued interest deposited to your account linked to your CDP Securities account.
It’s crucial to note that redemption proceeds will be processed only by the second business day of the next month.
Banks charge a standard processing fee of $2 similar to a bond application if you need more info on bond redemption head on here for a detailed redemption FAQ provided by MAS.
It’s advisable not to put all your eggs in SSB, have an emergency fund when the need arises.
How Much Can I Invest in The Singapore Savings Bonds?
When it comes to Singapore government bonds, the minimum amount is $500, while the maximum sum is $100,000.
In simpler terms, at any given time you can hold SSB worth $100,000; you can only top using multiples of $500.
You are also allowed by the government to apply for up to $50,000 on any single bond issue.
P.S. These figures are revised in the future, pending MAS’s review after the program has been in place for some time.
Investment Strategies for Singapore Savings Bonds
According to statistics published by MAS reiterate the popularity of Singapore savings bond amongst Singaporeans of all ages.
44% of all bondholders are 48 years and above while 40% are range between 31 and 47 years’ old, SSB’s are a safer bet especially in a volatile market environment.
Beginners Savings Programme
Tip: Ideal for young adults
Singapore government bonds were introduced to encourage Singaporeans to save for the future (long term).
The minimum investment amount of S$500 and issuance of monthly bonds, the MAS want to attract young investors who will regard it as a savings program.
The little principal amount will encourage young Singaporeans to begin small and start saving consistently on a monthly, bi-monthly or even a semi-annual basis.
Investors should also avoid redeeming their bonds early and wait until the elapse of the maturity period.
Tip: Ideal for working-class professionals
As a smart investor, you should not only rely on real estate and equities in your portfolio; bonds help reduce of portfolio’s volatility that will help you realize optimal risk-reward ratio.
Singapore savings bond should be your go-to tool as it provides a steady predetermined income for over ten years.
The savings bond is not tradable providing stability to your portfolio, and investors needn’t worry too much about market fluctuations and bond price.
Tip: Suitable for older investors with vast wealth
SSB’s have high liquidity and can be easily redeemed at any time if rates spike you can quickly sell your bonds back to MAS, get your cash and purchase newer savings bonds and other high-interest products.
SGS bonds and Corporate bonds appreciate only if you get the correct timing, but they can also result in investment losses, exchange commission charges, and market liquidity also influence them.
Investors should learn about the characteristics and traits of various investment products before deciding to invest all of your funds.
Are Singapore Savings Bond worth investing in?
With SBS’s, it’s inconceivable that you are going to become an overnight millionaire, but it’s an option you should seriously consider for individuals who want a low-risk investment.
Depending with what you want, whether it is balancing your portfolio of high-risk investment or stashing your finances for a brief period of time SSB’s is the best option for you.
The savings bonds make a lot of financial sense if you have less than $10,000 in your fund, it’s the perfect choice for those who cannot afford high-interest accounts.
Put it like this with as little as $500 you can start your journey in the world of investing. SSB’s are not perfect; they also have limitations.
The Singapore government bonds have considerably low investment returns compared to other investments such as ETF’s and REIT’s. It’s really up to you to decide if the savings bond will be worth your while.
Why you should invest in property instead
Singapore savings bond is a viable investment option, but it’s not the same as investing in property.
The Singaporean property market has recovered from its 2013 recessions coupled with government support the industry is booming than ever before, the property especially the luxury segment has recorded record prices making it a haven as an investment destination.
Despite, the cooling measures, the Singaporean real estate sector still has plenty of opportunities and value.
Here are some of the reasons why you should invest in property rather than Singapore government bonds
Singapore is harmonious and stable, two essential factors that make real estate investment a viable option and boost the long term growth of the sector.
Civil unrest, government seizures, and government are unheard of in Singapore, and your property investment will be safeguarded.
Strength of the Singapore dollar
The monetary approach of Singapore’s Central Bank appeals to many investors; the strength of the currency is pegged on the basket of other currencies.
Its banking system is very mature, the cost of funding is, and the procedure of acquiring loans is concise and clear.
Scarcity of land
Singapore is a tiny country; it is estimated to be 718.3 square kilometers in size; the majority of the population live in high-rise condominium built by either the government or private developers.
Scarcity of land causes prices of property to remain high coupled with high demand and increased population, and the property market will continue to rake in high rental yields and capital growth.
One such property that you should seriously consider investing in is Affinity at Serangoon.
Affinity at Serangoon
Affinity at Serangoon is a stunning condominium project situated at Serangoon North Ave 1 in District 19.
When it comes to access of public transportation the condo is unrivaled, its nearby three stations Kovan (NE13), Serangoon (NE12/CC13) and Lorong Chuan (CC14) all of which are a walking distance from the property boosting access to and from the property.
The condo is close to prestigious and world-class educational institutions such as Zhonghua Primary Schools, Peicai Secondary School, Kong Lycee Francais De Singapour, and Serangoon Garden Secondary School.
There is convenience everywhere you go, shopping, entertainment, and eateries amenities are a stone throw away.
Affinity at Serangoon is a 99-year leasehold development that will be seven block 14-story condominium blocks, two blocks of 3-story strata-landed homes and a block of 2-story strata-landed homes with 1,052 units in total.
The condo’s unit sizes range from 463 sq.ft. up to 1,711 sq. Ft, With 1 bedroom up to 4 bedrooms. While the strata-landed homes, the unit sizes start from 2,056 sq.ft. up to 2,347 sq.ft, with 4 or 5 bedrooms.
The condo has lavish facilities that will make your stay enjoyable and will enhance your living experience bringing maximum comfort to you and your family.
Why invest in Affinity at Serangoon?
- Located in a prestigious district
- Excellent connectivity and its nearby major expressways and MRT stations
- It’s a few minutes’ drive to plenty of dining and shopping destinations
- Its proximity to prestigious educational institution right from Kindergarten to tertiary level.
- The condominium has the potential for high rental yield.
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