Guide To Singapore Savings Bond (SSB): Is This The Right Investment For You?

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Singapore Savings Bonds (SSB): Interest Rates & How To Buy | SingSaver

Singapore Savings Bonds (SSBs) can make a safe and stable investment. Here’s a guide to its features, benefits, as well as the common questions investors might have.

With costs of living on the rise and the value of cash eroding due to inflation, the minimum required for a comfortable retirement is expected to be vastly different 20 years from now. Instead of asking yourself if you can afford to invest, perhaps the more important question should be: can you afford not to?

If you’ve asked around for recommendations on how to passively grow your nest egg in Singapore, you’re most likely to have heard of Singapore Savings Bonds (SSB). But what exactly are SSBs and how do they work?

Here’s everything you need to know about SSBs:

What are Singapore Savings Bonds?

Singapore Savings Bonds (SSBs) is an investment product offered to individual investors as a way to grow their money. 

In essence, SSBs are a type of Singapore Government Securities, and are issued and guaranteed by the Government of Singapore. 

SSBs have an investment period of 10 years, but investors are free to withdraw their investments at any point in time, with no penalty for early redemption. However, the highest returns come when they hold their SSBs till full maturity.

As an investment, SSBs have the following features:

  • Low risk (backed by the Singapore Government) 
  • Low returns (compared to other investments such as stocks and funds)
  • High liquidity (can withdraw investments at any point in time)
  • Limited investment amount (capped at $200,000 per individual)
  • Pay out step-up interest (increasing each year until Year 10)
  • Non-transferrable (cannot be traded or pledged as collateral)

You can invest a minimum of $500 to a maximum of $200,000 in SSBs. This maximum refers to the total amount of SSBs you have on hand at any one time.

Are SSBs safe to invest and why?

Generally speaking, bonds are among the safest investments out there, as they are primarily based on underlying assets that are highly rated for stability.

In the case of SSBs, the underlying assets are Singapore Government Securities – this essentially means that you’re lending money to the Singapore Government, which has a track record of healthy budget balances year after year. The Government of Singapore, also holds the highest ‘AAA’ credit rating from international credit rating agencies. As such, barring extreme scenarios, it is highly unlikely the Singapore Government would not be able to repay the debt. 

Also, government bonds are generally considered safe because, at the very worst, the government can always print more money to repay the debt upon maturity. 

And if you need further peace of mind, SSBs pay out dividends every 6 months, which can give you reassurance that your money is growing. 

What are the expected returns for SSBs?

Let’s look at the flipside. Although SSBs are safe to invest, the returns are not very exciting, especially so in recent years. This is in line with the age-old adage — high risk, high returns; low risk, low returns. 

Here’s a rundown of the returns for past SSBs. Note that SSBs are offered every month, so in order to avoid data spam, we are making yearly comparisons instead. 

Bond codeIssue date Maturity dateAverage return at Year 10 (%)
GX20050AMay 2020May 20301.39
GX19050AMay 2019May 20292.16
GX18050EMay 2018May 20282.39
GX17050FMay 2017May 20272.32
GX16050ZMay 2016 May 20262.09

Source: investingsingaporebonds.com

As you can see, in the past 5 years, the average 10-year rate of return for SSBs have trended downwards. And this downward slide doesn’t seem to be reversing anytime soon. 

Here’s the projected 10-year return for the October 2020 tranche of SSBs, straight from the horse’s mouth.

Source: MAS

That’s pretty low, especially considering the historical return of the SSB had been between 2% to 3%. 

To find the latest rates for this month’s SSB, go to the MAS website here. You can even use the SSB Calculator to find out how much interest you’ll earn each year.

How can I maximise my returns from SSBs?

With SSB returns hitting a low, it is all the more important to try to maximise your returns. There are two ways to try and get as much juice out of your investments as possible. They rely on the fact that: 

  1. SSBs are offered every month, and
  2. SSBs interest rates step up year by year

First, a new tranche of SSBs is issued each calendar month — each tranche with its own interest rate — which means the rate of return varies from month to month. 

Now, although SSBs are stable and returns tend not to fluctuate too much between months, you can eke out a bit more out of your investment by using dollar-cost averaging. Simply put, instead of making a lump-sum investment all at one go in a tranche that’s offering low returns, you should divide up your funds to buy several different tranches of SSBs. 

This way, you increase your chances of buying SSBs with higher returns to offset the lower-performing tranches, improving your overall results. 

Secondly, SSB interest rates increase year by year. Returns are the lowest at Year 1 and reach their peak by Year 10. So, when investing in SSBs, you should hold your bonds for the full period, until maturity, in order to reap the highest possible returns. 

Who should invest in SSBs?

With such low returns, does this mean SSBs are a bad investment? Well, not necessarily. 

In a properly designed portfolio, bonds (like other investments) have a role to play. SSBs, in particular, are virtually risk-free and highly liquid, two factors that make them ideal if you’re seeking to park your money. 

This need usually arises the closer you get to retirement, as you’ll need to ensure your cash is easily available, with the amount staying more or less the same.  

SSBs are also useful for investors who have a low appetite for risk and are willing to accept slow and steady returns. 

Quick lesson on financial planning: generally speaking, an investment portfolio should focus on growing your money when you are young and possess earning power, gradually switching focus to preserving your wealth as you get closer to retirement and the loss of earning power. 

It would be a bad idea to invest in something risky near retirement. A loss would jeopardise your ability to retire well. As SSBs are low-risk, low-return instruments, investors are more likely to increase their investments in them the older they get.

What are the eligibility requirements to start investing in SSBs?

Minimum age:18
Nationality: All
Investment term: Up to 10 years
Interest rates:Based on average Singapore Government Securities yields the month before.
Interest rates step up yearly, peaking in Year 10.
Interest rates for the entire 10-year term are fixed and locked in upon each issue.
Investment amount:Minimum $500, maximum $200.000
Investments should be made in multiples of $500
Eligible accounts: Individual Central Depository (CDP) account
-or- 
Supplementary Retirement Scheme (SRS) account
Interest payments:Every 6 months after issuance, paid into respective CDP or SRS account
Maturity and redemption: Redeemable in any given month with no early-redemption penalty.
Upon maturity, principal plus accrued interest will be paid into your investment account.
Transferability: SSBs cannot be traded publicly or privately, nor pledged as collateral. 
They are also non-transferable, except in case of death.

The table above summarises what you need to know to start investing in SSBs. And you’ll need either of two special accounts:

  • Central Depository (CDP) account, for investors using cash, or
  • Supplementary Retirement Scheme (SRS) account, for investors using their CPF monies

You may apply for a CDP account at any major retail bank, such as DBS/POSB, OCBC, HSBC, UOB, Citibank and Maybank. 

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Commonly asked questions, answered

What is a bond?

Think of bonds as a way for companies and governments to borrow money from you to finance new projects, maintain ongoing operations, or refinance existing debts.

In this case, the borrower is the party who issues the bonds, and the bondholder (aka you) is the one who is lending them money. When a borrower issues a bond, it will include:

  • the terms of the loan
  • coupon rate (interest payments that will be made)
  • the maturity date (when the principal amount will be returned to you)

Bonds are referred to as a fixed-income investment because you will receive your return on a steady, fixed schedule. This is different from equity investments, which are more volatile.

How are bonds different from stocks and funds?


StocksBondsFunds
Issued by Companies or businesses that have been registered on the stock exchange (A.K.A. ‘going public’)  Mostly governments or approved government bodies. May also be issued by private entities, such as banksInvestment houses, which buy into various stocks, bonds, commodities and other investments
Investment risk*HighLowModerate
ReturnsCan be volatileOften guaranteed by the issuerOnly when conditions are fulfilled
How it works / DifferencesYou buy a certain number of stocks of a company at $X per share. 

When you sell it off at a future date, you’ll make a profit if the price per share increases, vice versa.
No trading involved like stocks.

There is a specified maturity date, upon which you will receive your money back with returns. Some bonds may also pay dividends over the investment tenure.  
An example here would be ETFs, where you’ll access a basket of stocks, shares and commodities just by buying into this one single fund. 

The underlying asset class and industries are more diversified, which means it may be less volatile than stocks.

*Note: The investment risk ranking of ‘high’, ‘moderate’, and ‘low’ in the above table is comparative among these three instruments. It’s best to use your discretion when assessing investment risk before committing your money.

Which is better?

  • Fixed Deposits vs. SSBs

There are lots of similarities between Fixed Deposits (FD) and SSB: they both involve pledging a fixed amount of cash for a fixed amount of time to earn a reliable coupon rate. Both are also considered minimal risk investment products.

However, the maximum value you can invest in SSB is $200,000, whereas for FDs, you can invest as much as you want – in fact, if you’re planning to place a huge amount in FD with the bank, you’ll most likely be able to negotiate for a higher-than-advertised coupon rate.

FDs also usually allow you to withdraw funds immediately, while SSB withdrawals can take up to 30 days. Do take note that some banks have clauses that indicate an early FD withdrawal before maturity may require an administrative fee, may not be eligible for any interest accrued, or may even require you to return any interest paid. Be sure to read the T&Cs on this.

You can read more about Fixed Deposit vs Singapore Savings Bond (SSB) vs Savings Accounts here.

  • Exchange Traded Funds (ETF) vs SSBs

An Exchange-Traded Fund (ETF) tracks bonds, stocks, commodities, or a basket of assets like an index fund. An ETF trades like company shares on a stock exchange. It is subject to price changes throughout the day as they are bought and sold, which means greater volatility, but higher potential earnings.

Which is better depends on your risk appetite and personal financial goals. If you are risk-averse and want a low but stable interest that increases gradually over time, then go for SSB. If you are willing to take on a degree of risk for higher returns, an ETF could be a better choice.

Can Supplementary Retirement Scheme (SRS) funds be used to buy Singapore Savings Bonds?

Yes, you can use your SRS funds to apply for SSBs (you cannot, however, use CPF funds to invest in SSBs).

Submit your SSB application through the ibanking portals of your participating SRS operators (DBS/POSB, OCBC, or UOB). Similar to cash applications, the minimum application amount is $500 and a $2 transaction fee will be deducted from your SRS accounts for each application.

With the inclusion of SRS funds, the MAS raised the Individual Limit for SSB from $100,000 to $200,000 in December 2018. This limit applies to the total amount of SSBs you have on hand at any one time.

How do I buy a Singapore Savings Bond?

You can buy SSBs with cash or SRS funds.

For cash applications

You will need:

  1. a bank account with any of the participating banks (Citibank, DBS/POSB, OCBC, HSBC, Maybank, OCBC, Standard Chartered Bank, and UOB)
  2. an individual SGX Central Depository (CDP) account linked to your participating bank account through Direct Crediting Service (DCS)

Think of your participating bank account as a place to hold your cash, and your CDP account as a special account to hold your shares and bonds.

To open an individual CDP account, you can apply through your participating bank, or through any brokerage firm in Singapore. You can find out more about how to open a CDP account here.

Once you have a CDP account, you can start applying for SSBs through the ATMs or ibanking portals of your participating bank. The funds will be deducted from your account at the point of application.

You cannot apply for SSBs in person at the bank. 

For Supplementary Retirement Scheme (SRS) applications

You will first need an SRS account. You can open one with DBS, OCBC, or UOB (aka your SRS operator).

Apply through the ibanking portal of your SRS operator and the SRS funds will be allocated at the point of application. 

SSB application using SRS funds do not require the opening of a CDP account.

Important periods to watch out for

  • Application Period

Applications are open from the 1st business day up to the 4th last business day of each month, 7:00 am to 9:00 pm, Mondays to Saturdays (excluding Public Holidays). Participating banks will charge a non-refundable $2 transaction fee for every application request.

  • Allotment Day

The MAS will allot the new SSBs among applicants on the 3rd last business day of the month, known as Allotment Day.

In case the total amount of applications exceed the amount on offer in a particular month, you may not get the full amount you applied for. The excess cash will be refunded to you on the 2nd last business day of the month. SSBs will be issued on the 1st business day of the following month. 

If you invested using cash, you will be notified of the amount of SSB allotted to you by CDP through the mail. You can also check your SSB holdings through the CDP internet portal or by calling 6535-7511. 

If you invested using SRS funds, you will be notified of the amount allotted to you by your SRS operator through the mail. You can also check your SSB holdings with your SRS operator.

Otherwise, you may use the Singapore Savings Bonds internet portal to keep track of your combined SSB holdings.

  • Interest Payment

You will receive the first interest payment 6 months after the SSB is issued, and it will be credited to the bank account that is linked to your CDP or SRS account.

Interest will be paid every 6 months after that on the 1st business day of the month, and will be reflected in your CDP or SRS statements.

Why is there a difference between my Applied and Allotted amount of Singapore Savings Bonds?

There may be situations when the total number of SSBs applied for during the month exceeds the available supply. If that happens, MAS will allot SSB amounts according to the ‘Quantity Ceiling’ format.

This basically means that every applicant is first allotted a minimum of $500. Then, the ‘ceiling’ is raised in multiples of $500 until the total SSB amount has been allotted.

For example, in the case where only $10,000 of SSBs are available, but MAS received $18,000 in applications, here is how the funds will be allotted:

How SSB Allotment Works | SingSaver
Source: MAS

If you don’t get the full amount of SSB applied for, you will be refunded by the 2nd last business day of the month.

How do I redeem a Singapore Savings Bond?

When your SSB matures after a decade from its issuance date, your principal and interest payment will be credited to your participating bank account (not your CDP account) via Direct Crediting Service (DCS). If you had used your SRS funds, the payout will be made to your SRS account.

In case you want to redeem your principal and interest income before the SSB matures, you have to submit your redemption requests through the ATMs or ibanking portals of your participating bank. A $2 transaction fee will apply for each redemption request.

Redemption requests for SSB purchased with SRS funds can only be made through the ibanking portal of your SRS operator (DBS/POSB, OCBC, or UOB). A similar $2 fee will apply.

Can foreigners buy Singapore Savings Bonds?

Singaporeans, Permanent Residents (PRs), and foreigners can all apply for SSBs. All you need is to be at least 18 years old and possess an individual SGX Central Depository (CDP) account.

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Conclusion

When planning your own investment portfolio, be sure to personalise it for your own risk appetite and needs. Are you looking to buy a house? Are you planning to have children? What sort of lifestyle are you aiming for in your retirement?

SSBs are great for those looking for a form of long-term savings that is relatively risk-free. However, the low coupon rate means that you’ll barely keep ahead of inflation. So don’t put all your eggs in one basket, it is always recommended to keep a diversified portfolio. And before you invest, always be sure to have some emergency cash stashed away for unforeseen rainy days.

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