Achieving financial freedom and securing your retirement largely depends on building a portfolio of income-generating assets that provide a steady stream of passive income. A low-cost income investment portfolio is an essential component of retirement planning.
Among the investment options available to strengthen your income portfolio is the Singapore Savings Bond (SSB), which offers increasing interest rates with virtually no risk of capital loss, making it a compelling alternative to T-bills.
Additional reading: 4 Cash Alternatives to Invest in for Retirement When the Stock Market Is Volatile
What is Singapore Savings Bonds (SSB)?
SSB is a subset of Singapore Government Securities (SGS), offering a safe and flexible investment option for individual investors. Buyers can enjoy increasing returns over time and the freedom to redeem bonds in any month without penalties.
Not only can you invest in SSB using cash, but you can also do so with your Supplementary Retirement Scheme (SRS).
In this article, we will dive into the details of the Singapore Savings Bond (SSB):
- How safe is the Singapore Savings Bond
- How are interest rates for SSB determined
- How does SSB Compare to other options
- How to subscribe, redeem and check the balance of your Singapore Savings Bond
Are Singapore Savings Bonds Safe?
SSB is arguably one of the safest products on the market. The Singapore Government’s “AAA” credit rating and near-complete government backing reduce investment risks to a minimum.
What is the Latest Singapore Savings Bond Interest?
The Singapore Savings Bond is issued monthly. Click this link for the latest update of the SSB rate.
How are interest rates for Savings Bonds determined?
According to MAS, SSB interest rates are linked to Singapore Government Securities (SGS) yields. As SGS are traded, their yields fluctuate daily based on changes in market conditions.
The SSB on offer in any given month is linked to the daily average SGS yields as published by MAS in the previous month. The investor’s average annual compounded return over any period (e.g. 5 years) should broadly correspond to the SGS yield of the same holding period (e.g. 5-year SGS).
Therefore, the market determines the interest rates and returns on SSB and will fluctuate according to changes in market conditions, albeit with a one-month lag.
There may be two exceptions to this:
- The first exception is due to very small rounding differences of up to +/- 0.03% that may arise in the computation of average returns for Savings Bonds.
- The second exception may arise from time to time if the shape of the SGS yield curve does not allow the interest rates to step up. In such instances, the design of the Savings Bond prioritises the “step-up” feature of the interest rates over the matching to SGS yields for a given year. This is because the objective of the Savings Bond programme is to encourage and facilitate long-term savings and investment. An adjustment is made so that the interest payments do not step down in any year. This adjustment does not affect the return on the Savings Bond if it is held for the full 10 years.
This is the reason that even if we were facing an inverted yield curve in the past year, SSB continues paying step-up interests.
Curious about calculating your interest earnings each year? There’s a calculator where you can experiment!
You can click this link to access the calculator.
How do Singapore Savings Bonds Compare to Fixed Deposits and Other Singapore Government Securities
The Savings Bond combines features of a fixed deposit and a regular government bond. Notably, the early redemption feature, the long tenure and step-up coupons make for a unique offering. Below is a comparison table compiled by Business Times.
How to Invest in Singapore Savings Bonds (SSB)?
SSB is open to individuals aged 18 years and above. You can use either Cash or SRS to buy. Please note that you CANNOT invest in SSB with your CPFIS.
Additional Reading: Complete guide to CPF Investment Scheme (CPFIS)
If this is your first time applying for SSB, we’ve got you.
1. Preparation
If you want to use Cash buy
- A bank account: With DBS/POSB, OCBC, or UOB.
- An individual CDP Securities account (with the Direct Crediting Service activated). This allows interest payments from your Savings Bonds to be automatically deposited into your bank account.
Note: CDP acts as the custodian for Savings Bonds purchased with cash. They handle application processing, interest payments, and redemptions.
If you want to use SRS to buy
- Open an SRS Account: If you don’t have one already, visit an SRS operator (DBS/POSB, OCBC, or UOB) to open an SRS account. Your SRS operator will act as the custodian for Savings Bonds purchased using SRS funds.
- Apply: Submit your application through ATMs or internet banking portals.
- Check Application Results: Review the outcome of your application.
- Receive Interest Payments: Interest payments will be credited directly to your SRS account.
2. Application
A new Savings Bond is issued on the 1st business day of each month. You can apply via ATMs or Internet Banking Portals.
Cash Applications:
- Apply through: DBS/POSB, OCBC, and UOB internet banking or ATMs, and OCBC’s mobile application.
- Funds Deduction: Money will be deducted from the bank account linked to your ATM card or selected Internet banking account immediately upon application.
- Transaction Fee: A non-refundable $2 transaction fee applies for each application.
SRS Applications:
- Apply through: The internet banking portal of your SRS operator (DBS/POSB, OCBC, or UOB).
- Funds Locking: SRS funds will be locked or earmarked when you submit your application.
- Transaction Fee: A non-refundable $2 transaction fee applies for each application.
General Notes:
- No In-Person Applications: You cannot apply for Savings Bonds at bank counters.
- Application Changes: Once submitted, applications cannot be amended or cancelled.
3. Allocation and Issuance:
Allotment Day: MAS will distribute the new Savings Bonds among applicants on the third-to-last business day of the month. Application results will be available on the MAS website after 3:00 PM on that day.
Issuance Date: Savings Bonds will be issued on the first business day of the following month.
Cash Investments:
- You will receive a notification from CDP via mail regarding your allocated amount.
- Check your holdings online through the CDP internet service or by calling CDP at 6535-7511.
SRS Investments:
- You will receive a notification from your SRS operator (DBS/POSB, OCBC, or UOB) via mail regarding your allocated amount.
- Check your holdings with your SRS operator.
Refunds for Partially Filled Applications Due to Over-subscription:
- If the total amount of applications exceeds the available amount of Savings Bonds in a particular month, you may not receive the full amount you applied for.
- Excess Cash Refund: Any excess cash will be refunded to you by the end of the second-to-last business day of the month. You can check the refunded amount in the bank account you used for the application.
- Non-Refundable Fee: The $2 transaction fee charged by the bank is non-refundable.
Is There a Limit to Singapore Savings Bonds Subscriptions?
Indeed, there are limits. The minimum investment is $500, with subsequent investments required in denominations of $500.
While each application is capped at $50,000, your total Savings Bonds holdings cannot exceed $200,000 at any time.
Keep in mind that when you apply for Singapore Savings Bonds, you might not get the full amount you’re asking for. It’s like placing a bid where the final amount depends on the demand and supply of these bonds.
How to check what Savings Bonds you have?
If you’ve opted for cash subscriptions, your SSB allocation and the corresponding interest payments will be clearly indicated on your CDP account statement. Moreover, you can expect to receive semi-annual CDP statements in both June and December every year, provided you maintain holdings within your CDP account.
You can see what bonds are held in your CDP account through:
- CDP Internet service
- CDP Call Centre (6535-7511), or
- View your CDP account statement sent to your mailing address (if you are subscribed to it)
You can also check the bonds held in your SRS account through the internet banking portal of your SRS Operator if you have opted for SRS subscriptions.
Lastly, you can access the My Savings Bonds portal to view and track all your Savings Bond holdings.
How to Receive Your SSB Interest Payment
You will receive the first interest payment 6 months after the bond is issued. Interest will be automatically paid into:
- The bank account that is linked to your CDP account (cash applications).
- Your SRS account (SRS applications).
Interest will be paid every 6 months after that, on the 1st business day of the month. The interest payments will be reflected in:
- Your CDP statements (cash applications).
SRS statements (SRS applications). - Comparing SSB with T-bills/SGS Bonds
How to Redeem Your SSB
Redeem when Your Bond Matures
Each Savings Bond has a 10-year term. If you wait until the end of the 10 years without withdrawing your SSB early, your principal and the last interest payment will be automatically credited to your bank account linked to your CDP account (for cash applications) or to your SRS account (for SRS applications).
You don’t need to take any action, and there’s no $2 transaction fee.
What if you want to redeem it early?
Alternatively, you can redeem your Savings Bonds in any given month before maturity, with no penalty for exiting your investment early. Redeem in multiples of $500 up to your invested amount for each bond and redeem more than one bond per month.
However, a $2 transaction fee applies for each redemption request.
To redeem, submit your request by the closing date through the following channels:
- Cash investments – DBS/POSB, OCBC and UOB internet banking or ATMs, and OCBC’s mobile application.
- SRS investments – Redemption requests for Savings Bonds purchased with SRS funds can only be made online through your SRS Operator.
The redemption period opens on the 1st business day of each month and closes on the 4th last business day of the month. You will receive your redemption proceeds along with any accrued interest by the 2nd business day of the following month.
Let Me Summarize…
Singapore Savings Bonds offer a compelling investment option for individuals seeking a secure and potentially rewarding path towards financial freedom. With government backing, increasing interest rates, and flexible redemption options, SSBs provide a low-risk avenue for building a robust income stream under my Kueh Lapis Investment Framework.
While it may not offer the highest potential returns compared to riskier investments, the stability and safety make SSB an ideal cornerstone for a Sustainable Retirement Portfolio.
You can check the latest SSB rates by clicking this link.
I hope you’ve found value in this guide. If you want to keep track of the new issuance of future Savings Bonds or similar products, join our Telegram Channel or subscribe to our newsletter using the form below, and we’ll keep you updated.
What an informative guide to Singapore Savings Bonds (SSB)! This article breaks down everything from how they work to how to purchase them, making it easy for beginners like me to understand. The comparison with other investment options is particularly helpful. Thanks for simplifying such a complex topic!