MAS to raise deposit insurance coverage to S$100,000. What is the Deposit Insurance Scheme?

What happened?

The Monetary Authority of Singapore (MAS) will raise the maximum deposit insurance (DI) coverage per depositor to S$100,000 from S$75,000 from Apr 1, 2024.

This follows feedback received from a consultation paper in published in June this year. 

The increase in the deposit insurance is intended to ensure that the vast majority of small depositors remain fully protected in the event of a bank failure with an increase in average deposit balances. 

Earlier, it was shared that the percentage of fully insured depositors has fallen to 89% from 91% when the deposit insurance limit was last reviewed in 2019. 

According to the MAS, the latest proposed changes will result in 91% of depositors being fully covered by deposit insurance. 

The deposit insurance scheme came into focus earlier this year following the collapse of Silicon Valley Bank in the US.

However, the MAS has emphasised that the latest proposals are not in response to the stresses faced by some banks abroad earlier. 

Let us dive deeper into the deposit insurance scheme and understand if your savings are protected under the scheme.

What is deposit insurance?

The deposit insurance (DI) scheme is intended to act as your safety net when it comes to protecting your hard-earned savings in the event of a bank failure. 

This can help to provide more confidence amongst savers even with the focus on sound regulation and rigorous supervision by MAS, as well as good controls and risk management by the banks. 

This deposit insurance scheme is administered by the Singapore Deposit Insurance Corporation (SDIC) and it offers protection to insured deposits held with a full bank or finance company.

When a bank fails, small depositors can be compensated up to a maximum of S$75,000 currently. 

Here’s how it works when a bank fails: 

1. The Monetary Authority of Singapore (MAS) will request for Singapore Deposit Insurance Corporation (SDIC) to intervene.
2. The SDIC will then make arrangements to compensate depositors, which could be in the form of cheques, cashier’s orders, or electronic payments.

The compensation will be made from the DI Fund, which is built up from the premiums paid annually by DI Scheme members. 

What is covered under the SDIC deposit insurance?

The SDIC deposit insurance provides protection for deposits in Singapore dollars. This includes standard savings, current, or fixed deposit accounts, as well as monies placed with any scheme member such as the Supplementary Retirement Scheme (SRS), CPF Retirement Sum Scheme (CPF RS), and CPF Investment Scheme (CPF IS).

It's common for Singaporeans to have multiple bank accounts across different banks. This is probably a smart move as the SDIC will aggregate and insure your deposits of up to $75,000 with each bank currently. 

However, do keep in mind that the $75,000 insurance provided by the SDIC currently is for each bank. This means that if you have deposits spread across different bank accounts but within the same bank, you'll still only be covered up to $75,000.

In the event that you have two different bank accounts with the same bank, and $30,000 in savings account X and another $55,000 in savings account Y, the deposits in both your accounts will be combined by SDIC and insured up to S$75,000 as shown in the table below.

Additionally, savings placed under the CPF Retirement Sum Scheme and the CPF Investment Scheme with a Deposit Insurance Scheme member are aggregated and separately insured up to $75,000.

What is not covered under the SDIC deposit insurance?

While the SDIC provides coverage for most types of bank deposits, there are some exclusions to its coverage. 

These include:

• Foreign currency deposits
• Structured deposits
• Structured notes
• Investment products like shares, unit trusts

How do I check if my deposit is covered by SDIC deposit insurance?

It's easy to assume that all our deposits are automatically insured by the SDIC, but do we really know which products are eligible? To ensure the safety of our deposits, it's better to be safe than sorry.

The most straightforward way to check if your deposits are covered under the deposit insurance is to verify from the bank: 

• Request a register of insured deposits to determine which deposit products are covered.
• Check for the presence of a DI scheme disclosure statement in your banking documents, such as in the account opening forms, deposit account statements, and marketing materials.

You can also check if the bank is a member of the Deposit Insurance Scheme here. 

What is the Policy Owners’ Protection Scheme?

Apart from the DI, the Policy Owners’ Protection Scheme (PPF) is also administered by the SDIC. But instead of bank depositors, the PPF Scheme protects policy owners when their life or general insurer fails. 

When a PPF Scheme member fails, this is the series of events that would occur:

1. MAS will determine if the PPF Fund should be used and whether it will be used to transfer or run-off the business of the failed insurer or terminate its policies.
2. MAS will request SDIC to intervene.
3. SDIC will notify all policy owners of the affected PPF Scheme member through the media and provide information on how their policies will be impacted.

All insurers, including foreign insurers, that are licensed by MAS to carry on direct life business and general business are required to be members of the PPF Scheme. But there may be some exceptions allowed at the discretion of MAS. 

To check if your insurer is a PPF Scheme member, you can refer to the complete list of members on SDIC’s website here.

The PPF disclosure statement will also be displayed in the policy documents and product summaries.

What Is covered under the Policy Owners’ Protection Scheme?

This scheme provides coverage for the guaranteed benefits of your life insurance policies, subjected to cap limits. 

It also covers some types of general insurance policies. There are no limits for the protection of your general insurance policies, except for some specific where it is specified by law.

The PPF covers the following types of insurance policies:

• Life insurance policies, including term life, whole life, endowment, annuity, and long-term accident and health (A&H) policies
• ​Personal motor insurance policies
• Personal travel insurance policies
• Personal property (structure and contents) insurance policies
• Foreign domestic maid insurance policies

What would Beansprout do?

Before you put your savings into a product with a financial institution, you can check if your money will be protected under deposit insurance. 

If you have more than S$75,000 of savings, you may get a better peace of mind by having multiple accounts across different banks to make sure your deposits are insured. 

Check out Beansprout's Interest Maximiser Tool to find out which bank account allows you to earn a higher interest rate on your savings.