There is a lot of talk about investing and saving up your money for retirement going around. Having your money in a savings account is no longer enough if you plan for retirement. With the high inflation rate and the cost of living, many would agree that you cannot afford not to invest.
The SSB (Singapore Savings Bonds) is among the most common investment options for most Singaporeans and one of the country’s risk-averse ways to fight inflation. They have continued to increase in popularity since they were first issued in 2015. We have compiled this comprehensive guide to the Singapore Savings Bonds to help you understand the current rates and how to buy the bonds.
What Is SSB?
Singapore Savings Bonds, or SSB, are structured government securities designed to be accessible and suitable for all individual investors in Singapore.
Sound complicated? So how do they work?
Every time the government issues a bond, and you buy one, you lend the government your money. Once you lend them your money, they will return it to you with a small interest rate. Think of SSB like you are the bank to the Singapore government only that everyone can lend to the government.
The Singapore Saving Bond (SSB) was launched in October 2015 by the Monetary Authority of Singapore (MAS). They were designed to be issued monthly for at least five years after being launched. You can refer to the MAS’ issuance calendar for the upcoming tranced.
The government aims to give investors access to long-term interest rates with maximum flexibility at no risk. The best thing about SSB is that it will always trade at the par value, meaning that your capital is always protected regardless of your interest rate.
Key Features
- High liquidity since you can withdraw your investment at any time
- Low risk
- Low returns when compared to stocks and funds
- Limited investment amount
- Payout step-up interest
- Non-transferrable, meaning they cannot be pledged or traded as collateral
Pros of Singapore Savings Bonds
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Very Stable
SSB have their underlying assets as the Singapore Government Securities, which means that you are lending money to the government, which is a track record of having a healthy budget year after year. The Singapore government has the highest ‘AAA’ credit rating from the International credit rating agencies. Therefore, it is improbable that the Singapore Government cannot repay the debt.
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There Is No Penalty for Early Redemption
Most investment vehicles, such as fixed deposits and endowments, charge a fee if you withdraw your money prematurely. Singapore Savings Bond allows you free exit with no penalty, and you are not required to have a specific investment period.
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Low Minimum Amount
Investing in SSB does not require a lot of capital. You can start investing with as little as S$500you can start investing. This means you can start investing based on your financial situation. But of course, the higher the investment capital, the higher the returns. However, the investment capital does not affect the SSB interest rate you will receive.
Cons of Singapore Savings Bonds
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Low-Interest Return
SSB has low returns when compared to other investment vehicles like ETFs and Stocks. You will likely get an interest rate ranging from 1% to 3% with SSB, so if you would like higher yields, be open to looking elsewhere.
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High Returns Only Come at the Tail-End
SSBs have an interest rate step-up feature, which allows you to earn higher interest rates towards the tail end of the 10-year SSB tenor.
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Bond Issues Have Different Interest Rates Every Month
The current May 2023 issue has an average interest rate of 3.07% over the 10-year tenor. This is less than the 10-year average interest of 3.15% of April 2023 SSB issuance. The current June 2023 issue is offering a 2.81% in interest rate.
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SSB Has a S$200,000 Cap on Investment
There is a limit to the amount of money you can invest in SSB. It is also possible not to get total allotment requests based on a particular tranche’s demand.
Latest SSB
Here are SBMAY23 GX23050W bond details.
| Issue Code | GX23050W |
| Naming Convention |
|
| Tenor | Approximately 10 years |
| Amount Offered | S$700.0 Million |
| Issue Date | 02 May 2023 |
| Maturity Date | 01 May 2023 |
| Interest payment dates |
|
| Investment amounts | Minimum of $500, and in multiples of $500. The total amount of Savings Bonds you can hold at any one time cannot exceed $200,000 |
SSB Previous Months’ Bond
Here is a look at the outstanding Singapore Savings Bonds.
Expected Returns
Here are the returns from the past six issues:
| Bond Code | Issue Date | Maturity Date | Average p.a. Return at Year 10 |
| GX23050W | 2 May 2023 | 1 May 2033 | 3.07% |
| GX23040S | 3 Apr 2023 | 1 Apr 2033 | 3.15% |
| GX23030A | 1 Mar 2023 | 1 Mar 2033 | 2.90% |
| GX23020X | 1 Feb 2023 | 1 Feb 2033 | 2.97% |
| GX23010Z | 1 Jan 2023 | 1 Jan 2033 | 3.26% |
| GX22120S | 1 Dec 2022 | 1 Dec 2032 | 3.47% |
The SSBs returns seem to be increasing steadily from 1% to 3.5%, with the highest rates being between 2% and 3% in 2016.
Who Should Consider Investing in SSBs?
While SSB has very low returns, it does not mean that it is a bad investment. If you have a carefully curated investment portfolio, government bonds have an important role. They are highly liquid and risk-free, making them the perfect place to spend money.
These are essential factors, especially if you get closer to retirement since you need to ensure that you have cash readily available. Investing in anything risky when you are very close to retirement is a bad idea. In case of a loss, you might jeopardize the chances of retiring well. SSBs are low-return and low-risk financial instruments and are ideal for older investors.
How Much to Invest in Singapore Savings Bonds?
All you need is S$500 to start investing in Singapore Savings Bonds. This is the minimum amount you need to start investing. However, the individual limit is set at $200,000, including bonds bought with SRS and cash.
Interest Rates
Here is a look at the interest rate of this month’s bond to evaluate its expected returns:
| Year from Issue Date | Interest Rate (%) | Average Return Per Year (%) * |
| 1 Year | 2.81 | 2.81 |
| 2 Years | 2.81 | 2.81 |
| 3 Years | 2.81 | 2.81 |
| 4 Years | 2.81 | 2.81 |
| 5 Years | 2.81 | 2.81 |
| 6 Years | 2.81 | 2.81 |
| 7 Years | 2.81 | 2.81 |
| 8 Years | 2.82 | 2.81 |
| 9 Years | 2.82 | 2.81 |
| 10 Years | 2.82 | 2.81 |
Factors to Consider While Investing in Singapore Savings Bonds
Here is a look at some of the factors you may want to consider before investing in SSBs:
1. The Creditworthiness of the Government
Credit rating is a very valuable metric for evaluating any debt issuer, so it is only fair to determine the creditworthiness of your government. Singapore has the higher AAA rating in the world, so you may not need to worry about the creditworthiness of the government of Singapore.
2. Liquidity
It is essential to establish the trading capacity of the bond. So how fast can you sell the SSB when you need some cash? The principal amount and liquidity of the Singapore Savings Bonds are assured.
3. The Maturity Period
Bonds have a fixed term, unlike other investment tools such as stocks. It is essential to define your investment horizon before you invest in the SSB to ensure its maturity period syncs with your financial goals.
Steps on How to Invest in SSB
Here are the steps to follow when investing in Singapore Saving Bonds:
Requirements
Before you apply for Singapore Savings Bond (SSB), here is what you need:
- A bank account with any of these three local banks in Singapore, such as UOB, DBS/POSB or OCBC.
- A Central Depository Account (individual CDP securities account) with bank account linked.
Here is the process of how to invest in Singapore Savings Bonds (SSB):
- You can apply for SSB via two methods: an ATM (UOB, OCBC, DBS/POSB) or Internet Banking under Singapore Government Securities.
- Please note if you have an OCBC account, you can use an OCBC mobile app. Also, remember to have your CDP account number when applying for your SSBs.
A new Singapore Savings Bond is issued monthly for at least five years. The application window is open for each issue on the first business day of each month and closes four business days before the end of the month.
It is important to note that you can purchase SSB with cash or your Supplementary Retirement Scheme (SRS) funds. The MAS is considering allowing people to use their CPF savings to purchase SSB.
How to Redeem
When your Singapore Savings Bond matures after ten years, your principal and interest payment will be credited to your bank account via the Direct Crediting Service (DCS). If you have funded your SSB with your SRS funds, the payout will be credited to your SRS account.
Suppose you would like to redeem your principal before your interest before maturity. In that case, you must submit your redemption request through your participation bank’s ATM or internet banking portal. You will be charged a S$2 redemption fee on each redemption request.
Alternatives to SSB
Fixed deposits are an alternative investment tool to SSBs. They are both similar since they involve pledging a fixed amount for a fixed amount of time to earn at a reliable interest rate and are both considered low-risk investments.
Here is how the two compare:
| Fixed Deposits | Singapore Savings Bonds | |
| Interest rates | Lower | Higher |
| Duration/Tenure | 3 to 36 months | Up to 10 years |
| Minimum deposit amount | S$1,000 or S$10,000 and more for higher rates | S$500 |
| Maximum deposit amount | No limit | S$200,000 per individual |
| Liquidity | Low | High |
Related Questions (FAQs)
1. What Is the Interest Rate for SSB 2023?
2.81% per year. Note that the Jun 2023 tranche loses on 26th May 2023.
2. What Is the Interest Rate for SSB in January 2023?
3.26%
3. How Is Interest Accrued for SSB Paid?
The accrued interest is paid once you redeem your earnings via the ATM or ibanking portal.
4. What Is the Rate of SSB Singapore Bond?
You will receive an average SSB interest rate of 3.07% p.a. if you hold your Singapore Savings Bond (SSB) for ten years.
5. How Do I Know That My Application Is Successful?
The success of your SSB application depends on the demand for the SSB in that particular tranche. The size of each bond is always announced before the application opens. If the demands exceed the amount on offer in a month, the MAS allocates the binds to maximize the successful applicants.
Closing
If you are considering investing in SSBs, they are low-risk and require a minimum investment of S$500. The best part is that your principal is always secure, and you can withdraw your investment anytime without any penalties. However, consider looking elsewhere if you are looking for a high-yield investment option.
Key Takeaways
- Singapore Savings Bonds (SSB) are low-risk, highly liquid and require low investment.
- You must have an OCBC, DBS/POSB and UOB bank account to apply for an SSB.
- SSBs have a S$200,000 individual cap.
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