Singapore Savings Bonds (SSB) Complete Guide [Mar 2024]

Singapore Savings Bonds (SSB) Complete Guide

• Singapore Savings Bonds (SSB) provide you with a simple and low-cost way to generate safe returns.  
• SSB offer an attractive option to lock in long-term interest rates while offering flexibility of redeeming with no penalty. 
• If you are looking to park your money for the short term, then T-bills and fixed deposit accounts might also be a good alternative. 

Interest rate on the latest SSB

Many in the Beansprout community have been eagerly anticipating the latest Singapore Savings Bond (SSB).

In the latest issuance of the SSB (SBAPR24 GX24040Z), you will receive an interest rate of 2.95% for one-year. 

If you hold the SSB for 10 years, you will receive an average interest rate of 3.04% per annum. 

The interest rate received in each year of holding the SSB is shown below. 

Is the SSB worth buying?

The 10-year average interest rate of 3.04% offered by the latest SSB is above the historical average.  

The 10-year average interest rate of 3.04% offered by the latest SSB is also above the 10-year average interest rate of 2.88% in the previous issuance of the SSB.

However, the 10-year average interest rate of 2.88% offered by the latest SSB is below the peak of 3.47% in the SSB issuance in December 2022. 

Introducing the SSB

To understand the Singapore Savings Bonds (SSBs), we have to go way back to 2015.

This was when the first SSBs were introduced to provide individual investors with a long-term savings option that offers safe returns.

It is also meant to be simple and low-cost. You can just apply for it through your internet banking app! 

Some of the key features of the SSBs include: 

• Principal guaranteed. You will get your investment amount back in full. In other words, you will not incur any capital losses. This is an important feature as there are not many investment products that are principal guaranteed! 
• Flexible redemption. You can choose to get your money back in any given month, with no penalty! Hence, you do not have to decide how long to invest into the SSB from the start. 
• Long term. You can invest for up to 10 years, allowing you to save for the long term if that is what you prefer.  
• Step up interest. You will receive interest payments on the SSB every six months. The interest paid will increase or “step-up” over time. In other words, the longer your hold on to the SSB, the higher average interest rate you will receive. 
• Small minimum investment amount. You can invest with a minimum amount of $500, and in subsequent multiples of $500. 
• Monthly issuance. The SSB is accessible on a regular basis as they are issued monthly. 

Comparing SSB to T-bills and SGS Bonds

You will earn an interest on the SSB that is linked to long-term Singapore Government Securities (SGS) rates.

In which your next question will probably be, why not just invest in the SGS then? After all, the Singapore Government Securities are also backed by the Singapore Government. 

The key difference is that the SSB offer more flexibility compared to the Singapore Government Securities. 

The SGS have fixed maturities, which means that you will have to choose how long you want to put your money into the SGS when you are making the purchase. 

While the SGS can be traded in the secondary market, the price you be receive may be lower than what you paid if you decide to sell them before maturity. 

On the other hand, the SSBs can be redeemed in any month with no penalty. You will receive the initial investment amount plus accrued interest upon redemption. 

We really like this feature given the uncertainty over how much interest rates will rise over the next year.  

If interest rates rise, you can have the flexibility of redeeming your SSB and reinvesting your redemption proceeds into the new SSB that offers a better return.

You can do this while collecting any interest that has been accrued during this period. With no redemption fee!

Ok yes, there is a $2 subscription fee charged by the bank. And another $2 redemption fee if you redeem early. Together, this will represent 0.8% of your investment amount if you are putting in $500. But this should be less significant as the investment amount increases.

Comparing SSB to fixed deposits

Despite the fall in fixed deposit interest rates, they still remain higher than the interest rate on the SSB. 

However, do note that fixed deposits do not allow you to lock in interest rates for 10 years, as they are usually offered in terms that range from a few months to a three years.

There is also a higher minimum deposit requirement for fixed deposit. The minimum investment for the Singapore Savings Bonds is just $500. 

The SSB is also more flexible than fixed deposits. They can be redeemed (in multiples of $500) in any month with no penalty. Interest earned over the period of investment will also be paid in full.

So here’s our verdict on the SSB. 

We like the SSB as it allows us to lock-in interest rates for longer maturities. 

With the uncertain interest rate environment ahead, it also provides flexibility as a place for you to park your money somewhere before deciding to commit to other fixed income assets. 

However, if you are looking at a place to park your money for the short term, then the T-bill and fixed deposit accounts could also be a good alternative.

Risks of investing in the SSB 

The Singapore government has the strongest credit rating by international credit rating agencies. And the SSB is principal guaranteed by the Singapore government. 

While the SSB has very low risk, this does not make them entirely risk free. 

As we have seen and heard many times, all investments carry risk.

It’s like you have left your umbrella at home because the weather forecast says there is a very low probability of it raining. But this does not mean it will never ever rain.  

One risk we can think of is liquidity risk. When you decide to redeem your money, you will only receive the payment on the 2^ndbusiness day of the following month. 

This is the key reason why we will not put all our emergency cash into the SSB. 

While we all hope that we never have to tap on our emergency cash, we will never know for sure when the need to use it will arise. 

And what we will not want to happen, is to have to wait for days or weeks before we are able to receive this cash that we need to use urgently. 

How much would I invest in the SSB? 

There are a few key figures here you’d need to know.  

The minimum amount to invest in the SSB is $500. 

The maximum amount of SSB that you can hold is $200,000. 

My personal view is that you should still hold a certain amount of emergency cash in a bank account or a cash management account with higher liquidity. 

This can be three months’ worth of your expenses. Or six months. Or 12. Whatever allows you to sleep soundly at night. 

Money that you know you can immediately tap on without having to wait till the next month to withdraw. 

Then some of the remaining cash on hand can go into SSBs. 

Step by step guide to subscribe to the SSB

You can apply through DBS/POSB, OCBC and UOB internet banking portals and ATMs, and OCBC’s mobile app.

For Supplementary Retirement Scheme (SRS) subscriptions, you can go through the internet banking portal of your SRS Operator.

You will need to have a CDP account to apply for the Singapore Savings Bonds. Find out how to open a CDP account here.

Source: MAS

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