5 Essential Investment Account Types in Singapore

An investment account is what investors use to buy and hold investments, such as stocks, bonds, and unit trusts.

There are different types of brokerage accounts available, each designed for a specific use case. Choosing the right high-interest investment account is one of the initial steps when starting your investment journey.

This guide will help you select the best investment account based on your savings goals, eligibility, and how you want to structure ownership of the account. It will also include other types of savings plans and schemes that can help with achieving different life goals.

1. Brokerage account - Standard 

In Singapore, standard brokerage accounts, which can be opened with financial institutions like DBS Vickers, OCBC Securities, or Standard Chartered, provide access to a wide range of financial instruments, including stocks, unit trusts, bonds, and exchange-traded funds (ETFs).

With a standard brokerage account, you may encounter different account structures depending on the types of stocks you wish to trade:

• CDP-linked account: This type of account is used for trading stocks listed on the Singapore Exchange (SGX). Securities are held electronically in the Central Depository (Pte) Limited (CDP). Here’s a guide on how to open a CDP account.

• Custodian account: For trading stocks listed on overseas stock exchanges, you'll typically use a custodian account. In this case, the brokerage holds the securities on your behalf.

When you open an investment account, the brokerage may offer both cash and margin account options. A cash account is suitable for most investors in Singapore. It allows you to purchase investments using the funds you deposit. A margin account allows investors to borrow money from the brokerage to buy investments. Margin trading involves higher risk and is generally recommended for experienced traders.

While cash and margin accounts are common, other account types exist globally. These include retirement accounts (designed for long-term savings with tax benefits, like 401(k) in the US or Individual Savings Accounts (ISAs) in the UK; Singapore's CPF system serves a similar purpose) and managed accounts (where a professional manages your investments for you). 

Benefits: Investment accounts in Singapore provide access to diverse investments, including local and international stocks, unit trusts, bonds, and ETFs. They offer flexibility in account ownership and facilitate various investment strategies.

Considerations: You must be a legal adult (at least 21 years old in Singapore) and meet the brokerage's identification requirements. It's important to note that in some countries, profits from selling investments (capital gains) are subject to tax. However, Singapore does not impose capital gains tax, which can be a significant advantage for long-term investors.

Learn more: Best brokerage accounts to start your investment journey in Singapore

2. Retirement investment accounts

In Singapore, the primary retirement savings mechanisms are the Central Provident Fund (CPF) and the Supplementary Retirement Scheme (SRS).

The Central Provident Fund (CPF) is Singapore's mandatory social security savings scheme, where contributions are allocated to Ordinary, Special, and MediSave Accounts. A portion of CPF savings can be used for investments under the CPF Investment Scheme (CPFIS). 

The Supplementary Retirement Scheme (SRS), on the other hand, is a voluntary savings scheme designed to complement CPF, allowing individuals to save for retirement and enjoy tax relief on contributions.

For self-employed individuals in Singapore, retirement savings are primarily managed through the Central Provident Fund (CPF) and the Supplementary Retirement Scheme (SRS). Self-employed individuals should carefully consider how these options fit into their overall retirement strategy.

Benefits: Both systems offer benefits: SRS allows for tax relief, while CPF ensures compulsory savings for future security. Furthermore, investment options available under CPFIS and SRS can potentially yield higher returns compared to regular savings accounts. 

Considerations: However, it's important to consider that CPF contributions are subject to specific usage restrictions, mainly for retirement, housing, and healthcare, and SRS funds are generally locked in until the statutory retirement age.

Learn more: CPF Investment Scheme (CPFIS): Guide to investing with your CPF

3. Investment accounts for children

While most investment accounts in Singapore require the account holder to be at least 21 years old, parents can still invest on behalf of their children.

In Singapore, parents commonly employ a combination of investment accounts and education savings schemes to secure their children's financial future. 

This often involves strategies such as investing in unit trusts or ETFs through a regular investment account, with the long-term goal of accumulating funds for tertiary education fees. Parents may also utilise the Child Development Account (CDA) for early childhood expenses and subsequently supplement it with other investments to achieve longer-term financial objectives. 

Furthermore, some parents choose to create a diversified portfolio of stocks and bonds, with the aim of generating passive income that can contribute to their children's future needs. These diverse approaches reflect the strong emphasis on long-term financial planning and proactive provision for children's future well-being in Singapore.

Benefits: These accounts facilitate long-term investment growth, offering the potential for substantial returns over time. Furthermore, they grant control to the parent or guardian to make investment decisions until the child reaches adulthood, ensuring responsible management of the funds.

Considerations: Remember that investments involve risk, particularly when saving for long-term goals like a child's education. Market fluctuations can impact returns, so consider diversifying and seeking professional advice for a balanced approach to your child's financial future.

Learn more: What is a brokerage account, and how to set one up

4. Accounts for education

There are specific types of accounts designed to help save and invest for education expenses.

In Singapore, the Edusave Account is a government-managed account that helps families save for their children's education. These accounts receive government contributions, providing a boost to education savings.

In addition to Edusave, some banks and financial institutions in Singapore offer education savings plans that allow parents to invest funds for their children's future education. These plans may offer various investment options and potential growth.

Benefits: Education accounts, including Edusave, can offer advantages such as withdrawals for qualified education expenses. Notably, Edusave accounts also provide the benefit of government-backed contributions, which enhances savings for Singaporean children. 

Considerations: However, it's important to consider that funds in these accounts are typically restricted to education-related expenses, and some education savings plans may impose penalties for withdrawals used for non-qualified purposes.

5. Special Needs Savings Scheme (SNSS)

In Singapore, the Special Needs Savings Scheme (SNSS)1 is a dedicated savings scheme designed to help parents and caregivers set aside funds for the long-term care needs of their dependents with disabilities. This scheme, administered by the Ministry of Social and Family Development (MSF), aims to provide financial security and support for individuals with disabilities throughout their lives.

Benefits: The SNSS provides a secure way to accumulate savings, ensuring long-term financial security for individuals with disabilities. Furthermore, while designed for long-term care, the SNSS also provides some flexibility in how funds can be used for approved expenses related to the individual's care and well-being.

Considerations: There may be limits on the amount that can be contributed to the SNSS account, either annually or in total. Additionally, funds can only be withdrawn for expenses directly related to the care and well-being of the person with disabilities, and these expenses must be approved by the MSF. 

It's crucial to consult the official MSF website and guidelines for the most accurate and up-to-date details on the Special Needs Savings Scheme in Singapore.

In Singapore, financial institutions like banks and brokerage firms typically offer standard investment accounts. Some also provide options for education savings.

For investors who prefer to self-direct their investments, opening an account with an online broker is likely the best choice. Consider trading platforms like DBS Vickers, OCBC Securities, or Standard Chartered Online Trading for a range of investment options.

If you prefer professional portfolio management, robo-advisors offer automated investment services at competitive fees. Explore platforms like Endowus or Syfe for automated investment solutions.

To help you compare different investment platforms in Singapore, the following table provides a general overview: