Fixed Deposits (FD) vs. Singapore Savings Bonds (SSB): What’s the Difference?

Bonds vs. fixed deposits

Fixed deposits and Singapore Savings Bonds serve distinct purposes for investors. A Fixed deposit offers a fixed interest rate over a set period, providing predictable returns, while a savings bond allows investment for up to ten years with increasing interest rates, offering greater flexibility than fixed deposits along with monthly redemption options.

Although both are considered safe investment options, a savings bond provides more liquidity, whereas fixed deposits offer guaranteed fixed returns. Key attributes, including tenure, interest rates and redemption terms, vary between the two, and will be further detailed in the comparison table below to provide you with a better understanding.

First, what are fixed deposits and bonds?

• A fixed deposit (FD) is a savings account offered by banks in which you agree to deposit a lump sum of your money for a fixed period, such as six months, one year or three years. The interest rate you earn varies based on the tenure of the deposit and the bank's promotional offerings, and early withdrawals from a fixed deposit typically incur penalties.

>> Read: The best high interest savings accounts

• A Singapore Savings Bond is a bond issued by the Singapore government. It features a step-up interest structure, meaning the interest rates increase the longer you hold the bond. Versus fixed deposits, Singapore Savings Bonds can be redeemed at any time without incurring any penalties.

When should you open a fixed deposit account?

1. If you have a lump sum of money you do not need immediately. A fixed deposit is an ideal option when you have a substantial amount of funds that you can afford to set aside for a specific duration. By depositing this lump sum into a fixed deposit, you can earn a predetermined interest rate, allowing your savings to grow steadily over time.

2. If you prefer a guaranteed, predictable return. Fixed deposits offer the assurance of guaranteed returns, as the interest rate is fixed for the entire tenure of the deposit. This predictability makes fixed deposits a reliable choice for individuals who prioritise stability and wish to avoid the fluctuations associated with market-linked investments.

3. If you are comfortable locking your money for a fixed period. Fixed deposits require you to commit your funds for a predetermined period, during which you cannot access them without incurring penalties. This commitment allows you to earn a higher interest rate compared to regular savings accounts, rewarding you for your long-term savings approach.

Promotional rates from some banks can offer even higher returns than standard fixed deposits, providing an opportunity to maximise your earnings. Common fixed deposit tenures in Singapore range from one month to five years, with interest rates varying based on the tenure and the bank's existing offerings.

>> Read: The best fixed deposits in Singapore

When should you consider bonds?

1. If you want a flexible investment that allows early withdrawals without penalties. Singapore Savings Bonds (SSBs) offer a unique advantage versus fixed deposits, in that they can be redeemed at any time without incurring penalties. This flexibility makes them an attractive option for investors who prioritise access to their funds while still earning interest. 

2. If you want a government-backed option with low risk. SSBs are issued and fully backed by the Singapore government, providing a high level of security. This makes them a safe haven for investors seeking to preserve capital while earning a steady return, especially in uncertain economic climates.  

>> Read: Investment strategies and asset allocation by age 

3. If you plan to hold for the long term to benefit from step-up interest rates. The step-up interest rate structure of SSBs means that the longer you hold the bond, the higher the interest rate you will receive. This feature incentivises long-term investment and allows your savings to grow progressively over time.  

Compared to traditional bonds, Singapore Savings Bonds are designed for individual investors, offering greater accessibility and flexibility. Traditional bonds may require larger investment amounts and may not offer the same ease of redemption.

>> Read: A guide to Singapore Savings Bonds

Compare them at a glance

Fixed deposits vs. Singapore Government Securities vs. Treasury bills

All three investment options involve a similar trade-off: You agree to lose access to money for a period of time in exchange for a predictable rate of return. However, they differ in key aspects.

What are they and where to buy: Fixed deposits are savings accounts offered by banks in Singapore. Singapore Savings Bonds and Treasury Bills (T-Bills) are investment options issued by the Singapore government, both considered safe due to government backing. Singapore Savings Bonds are accessible via local banks' ATMs or internet banking, while T-Bills are acquired through auctions by the Monetary Authority of Singapore (MAS).  

What are their rates: Fixed deposit rates depend on the bank and tenure. Singapore Savings Bonds rates increase over time, and Treasury Bills rates are competitively determined by auction bids, reflecting current market conditions. Refer to the bank or MAS websites for current rates.  

How long do they hold money for: Treasury Bills are short-term, with tenures of six months or one year, suitable for those with short-term liquidity needs. Singapore Savings Bonds offer a longer-term horizon, up to 10 years, with increasing interest that are ideal for long-term savings goals. Fixed deposits provide a range of tenures, typically one month to five years, catering to various savings timelines.  

When do I cash out: Holding to maturity is standard, but early access differs. Treasury Bills cannot be redeemed early and must be sold on the secondary market. Singapore Savings Bonds offer monthly redemption without penalty, providing flexibility. Meanwhile, fixed deposits typically have early withdrawal penalties, varying by bank.  

In essence, Treasury Bills suit those seeking short-term returns with competitive rates and are comfortable with secondary market sales. Singapore Savings Bonds are ideal for long-term, low-risk savings with flexibility. Fixed deposits suit those wanting guaranteed returns over a fixed term and are comfortable with early withdrawal penalties

Compare types of savings accounts

• Regular savings accounts

• High interest savings accounts

• Central Provision Fund (CPF)