Best Alternatives to Fixed Deposit Accounts in Singapore

Alevin Chan

Alevin Chan

Last updated 14 September, 2023

Fixed deposits aren’t the only way to earn better interest on your savings. From bonds to endowments and managed accounts, here are some worthy alternatives to consider.

The base interest rate on bank savings accounts is a paltry 0.05% per annum. That’s less than nothing, when you factor in inflation. Today, banks offer many ways to boost your savings interest rates, but this usually involves having to manage several tasks and transactions. 

A simpler way to earn higher interest on your savings is to use a fixed deposit account, but such comes with restrictions on duration and minimum deposit sums. However, you can access between 2.7% to 3.6% per annum interest. 

But what if you don’t want any restrictions, or want higher interest rates for your trouble? Are there any other ways to get comparable or better returns? Why, yes, of course there are!

Table of contents:

 

 


Best alternatives to fixed deposits for higher returns and/or greater convenience 

Singapore Savings Bonds
- Average returns over 10 years: 3.06%
(3.01% to 3.2% per annum)
- min S$500 to invest 
Singapore Government Securities (SGS Bonds)
- Tenure: 2 to 50 years
- Yield: 2.8% to 3.62% per annum
- min S$1,000 to invest
Treasury Bills
- Tenure: 6 months or 1 year
- Yield: 3.66% to 3.75% per annum
Short-term endowment plans
- Tenure: 3 years 
- Returns: approximately 3.5% to 4% per annum 
Digital bank accounts 
- Interest: 2.5% to 2.68% per annum
Managed cash accounts
- Interest: 3.6% to 4.9% per annum

 

 


Singapore Savings Bonds (SSBs)

A popular alternative to fixed deposits, SSBs are debt-instruments offered by the Singapore Government. Essentially, you are loaning a sum of money to the government, which promises to pay you a fixed interest rate every year you hold the bond. 

SSBs last a maximum of 10 years per tranche, and attract higher returns towards the final few years of its tenure. This is to discourage early redemptions.

SSBs are 100% capital guaranteed, and redeemable at any moment. You will receive your full principal sum upon redemption, along with any accrued interest. 

Note that you will need a minimum of S$500 to start investing. For maximum returns, you should plan to hold your SSB for the full 10-year duration.

Read this next:  The Complete Guide To Singapore Savings Bond (SSB)


Singapore Government Securities (SGS Bonds) 

SGS Bonds are similar to SSBs, in that they also represent loans made to the Singapore Government. However, SGS Bonds are available in a much wider variety of tenures – from as short as 2 years, all the way to 50 years. 

The yield on SGS Bonds may fluctuate slightly depending on market conditions, but generally volatility isn’t too much of a concern with such investments. 

Given the greater variety of tenures, SGS Bonds may be more attractive to some investors. You’ll need a higher sum to invest though – SGS Bonds start at a minimum of S$1,000. 

More on this topic: What are SG Bonds and Should You Invest in Them?


Treasury Bills (T-Bills)

T-Bills is another category of investment bonds issued by the Singapore Government. Unlike SGS Bonds and SSBs, they have much shorter tenures – either 6-months or 1 year, making them a better pick for those who are looking for short-term investments. 

Currently, T-Bills provide around 3.66% to 3.75% per annum in yield. You do not receive any interest payments – instead, you purchase the T-Bills at a discounted rate equivalent to the yield amount, and sell it back for the full face value at maturity.

More on this topic: A Guide to Treasury Bills (T-Bills) in Singapore


Short-term endowment plans

In Singapore, short-term endowment plans are offered by both insurers and banks. They are advertised with a fixed interest rate, which is an annualised rate equivalent to the lump-sum return you receive when the endowment comes to an end.

Typically, short-term endowments are offered in three-year terms, and have a single-premium structure; this means you’ll need to make upfront payment of the amount you want to invest in full, instead of splitting it over monthly premium payments. 

In exchange, you will receive coverage against death for the duration of the endowment, with the death benefit equivalent to between 101% to 105% of the premiums paid. Note that such benefits cease upon the maturity of your endowment. 

Importantly, early surrender of your endowment will result in a penalty, which will severely reduce the amount of capital you can get back. As such, you should only invest in short-term endowments if you’re absolutely sure that you can go the full duration without having to tap on the money you invested.

Read this next: Best Short & Long Term Endowment Plans in Singapore

 

 


Digital bank accounts

In a bid to compete for customers, digital banks are offering attractive interest rates. 

While the rates are slightly lower than what you can get with fixed deposits, there are little to no restrictions on your deposits. You can deposit and withdraw your money freely, and interest is calculated and earned on a daily basis. 

Currently, you can choose from:

  • GSX Savings Account, which pays 2.38% per annum on deposits in your main account, and a slightly higher 2.68% per annum on monies held in sub-accounts called “pockets” – the latter, presumably to help you save up towards your goals.
  • Trust Bank, which pays 2.5% per annum on the first S$125,000 of your deposits.
  • Mari Savings Account, which pays a flat 2.5% per annum on your deposits. 

More on this topic: 
Trust Bank vs GXS Bank: What Are Digital Banks, Vs Traditional Banks
GXS Savings Account Review 2023 - SingSaver
Best Savings Accounts to Stash Your Cash


 

 


Managed cash accounts

Managed cash accounts are not bank deposit or savings accounts. They are investment accounts that are managed by an investment firm on your behalf, and your funds are usually invested in cash funds, bonds and cash-equivalents. 

These types of investments are generally lower risks than, say, stocks and shares, and are capable of providing steady, but lower, returns. As such, cash managed accounts are able to compete with fixed deposits in terms of interest rates.

Managed accounts may have different features, depending on the provider. For instance, some may require a lock-in period but others don’t, or there may be a minimum investment sum required. 

Some cash managed accounts may also offer guaranteed interest rates. While these make for attractive offers, they should not be taken as permanent. 

This is because like all investments, cash managed accounts are impacted by market volatility, and investors should expect rate adjustments from time to time. 

Some options for cash managed accounts include:

  • Syfe Cash+ Guaranteed, which offers a fixed return of 3.7% per annum.
  • StashAway Simple Guaranteed, which pays 3.6% per annum, but there’s a 6-month lock-in period.
  • Endowus Cash Smart, which has project yields of between 3.6% to 4.9% per annum
  • Chocolate Finance, a new entrant that is offering a guaranteed 4.5% per annum on your first S$20,000, and a target 3.5% per annum thereafter. 

More on this topic:
Best Cash Management Accounts In Singapore (2023)
Syfe Review (2023)
Best Robo Advisors Singapore 2023
StashAway Review: Goal-Getting Investments Through ETFs


Pros and cons of fixed deposits vs alternatives 

To help you choose, here’s a quick summary comparing fixed deposits against the alternatives we’ve discussed.

Fixed deposits
Alternatives
2.7% to 3.75% per annum 
2.5% to 4.9% per annum 
3, 6, 9 or 12 months
6 months, to 50 years (no minimum duration for some)
Minimum sums range from S$500 to S$50,000
- from S$500 for Singapore government bonds
- from S$5,000 for short-term endowments - 
- no minimum for digital bank/managed cash accounts
Protected by SDIC 
May not have SDIC protection

When compared to the alternatives, fixed deposits offer a narrower range of returns, from 2.7% to 3.75% per annum. Meanwhile you may get lower interest of 2.5% or reap higher returns of up to 4,9%, depending on what you choose, and provided market conditions are favourable. 

Fixed deposits are also more restrictive in tenure, with most banks offering deposit terms of between 3 months to 12 months. However, you can find a much wider range of durations with alternative methods: from 6 months to 50 years with bonds and treasuries; around 3 years with endowments; and potentially no lock-ins with digital bank and managed cash accounts. 

One important consideration is the minimum sum required to earn the higher interest. Some fixed deposits allow small sums, such as S$500, but that’s the exception. Most of them require substantial deposits starting from S$10,000 or more. 

You’ll find that alternative methods are less restrictive in this regard, with the possible exception of short-term endowments; these typically require at least S$5,000. 

Lastly, bank fixed deposits are covered by SDIC, which insures your deposits up to a certain threshold. Note that not all alternative methods are covered by SDIC, either because it is not required (such as for bonds and treasuries) or there may be other consumer protections in place. 

It is crucial to find out exactly how your deposits, funds or investments are protected (or not) and you should only proceed if you clearly understand the risks you may be exposed to.

If you are doubtful, or unable to find satisfactory answers to your queries, it may be better to stick with the method you are familiar with.

Read these next:
Investment Guide: SingSaver's One-Stop Solution
How To Start Investing In Singapore: A Beginner's Guide (2023)
Best Online Brokerage Accounts In Singapore
14 Best Fixed Deposit Accounts 
Fixed Deposits vs. Endowment Plans vs. Cash Management Accounts
Best Ways to Use Fixed Deposit Accounts (You Never Knew About!)

 

 

An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.

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