Interest rates and returns for Singapore Savings Bonds (SSB) in January 2024

With the increased attention towards personal assets, people are looking to strengthen their portfolios by investing in low-risk bonds. Learn more about Singapore Savings Bond (SSB), a bond with a steady rise in interest rates with no capital loss!

What is SSB?

The Singapore Savings Bond (SSB) is a bond fully backed by the Singapore Government. No capital loss will be incurred and you can always get your investment amounts back. The SSB is a long-term bond offering step-up interest, meaning that the longer one invests in it, the higher the interest income. It is also flexible, and one can exit the SSB at any time without any penalties.

The SSB has a step-up interest rate system, where the interest rate gets progressively higher for each year of funds staying invested in the bond.

This means that, the longer you remain invested in the SSB, the higher interest rates and average yearly returns you will enjoy. For a better understanding of step-up interest, head over to Dr Wealth for a comprehensive explanation of SSB's interest system.

Features of the SSB

1. Very minimal risk

The Singapore Government's credit rating by Moody's, S&P, Fitch and R&I are Aaa, AAA, AAA and AAA respectively, which means that the Singapore Government's investment offerings of SGS bonds, T-bills and Savings Bonds are some of the safest investments to hold, with a very low risk of default, and high creditworthiness.

With near-zero risks of losing your money, the SSB can be a good way for Singaporean investors to diversify their investment portfolios to manage overall risk. It is also a good investment to hold for more conservative investors with its provision of relatively good returns considering its low risk.

2. High liquidity and flexibility

Investors may wonder what the difference between SSB and fixed deposits are, since both are low in risks. Well, here is where the shining point of the SSB comes through — investors can exit the SSB without any penalty for early redemption!

Unlike fixed deposits where a penalty fee is usually charged for premature withdrawal, the SSB allows investors to extract their funds anytime, with a waiting period of one month.

At the initial stage of investing, there is also no need for you to decide on the intended period and duration you wish to invest for. This gives you an opportunity to use the SSB investments as a sort of rainy-day fund, as the money invested can always be taken out anytime should unforeseen circumstances occur.

3. Ease of investing in SSB

The SSB is also one of the easiest and most accessible investment bonds to invest in. Unlike many other bonds or investment instruments which require you to sign up for accounts on specific trading platforms in order to gain access to certain markets, the application process for SSB is much simpler.

Any individual above the age of 18 is eligible to apply for the SSB. All you need is a local bank account (DBS/POSB, OCBC, UOB) and a CDP (Central Depository) account that is linked to the local bank account. Investors can also invest in the SSB via either cash or SRS.

Simply click here for a step-by-step guide on how to start investing in SSB!

4. Low minimum amount

The investment amounts for SSB range from a minimum of S$500 to S$200,000, and the investment sum should be in multiples of S$500. With such a low entry point of S$500, the SSB does make for a readily accessible investment opportunity, especially for beginners and conservative investors.

5. Non-transferrable

SSB is non-transferrable and cannot be traded in the open market, traded on the Singapore Exchange or pledged as collateral.

Only in certain situations, such as the death of the bondholder, can the SSB be transferred to the rightful beneficiaries under the bondholder's will or under the intestacy law.

6. Relatively high interest rates

At an average yearly return of 2.81 per cent for a tenure of 10 years, the SSB is slightly less than the current rates bank fixed deposits are offering. The return rates have been steadily decreasing over the past few months. The current interest rates are slightly below the peak in 2018-2019. That being said, due to its very minimal risk, the SSB's rate of return could be seen as rather ideal.

Illustration of SSB January 2024 interest rates

This month's bond, SBFEB24 GX24020T, which has the application closing date of 26 Jan 2024, an Issue Date of 01 Feb 2024 and a Maturity Date of 01 Feb 2034, will have an interest rate of 2.72 per cent to 3.09 per cent per annum, and an average yearly return of 2.81 per cent if an investor holds the bond for 10 years.

The interest rates have been on a steady decline in recent months. This month's issues is slightly lower than last month's issuance which had an average yearly return of 3.07 per cent if held for 10 years.

The below table illustrates the interest per cent for investors who are invested in the SSB for the specified number of years.

For example, if you have invested a certain amount, say S$1,000, into SSB and redeemed it after one year, the interest on the S$1,000 would be 2.72 per cent, and the amount you can get back would be approximately S$1,027. This table applies to the SSB with the issue date being 01 Feb 2024, SBFEB24 GX24020T.

Year from Issue Date	1	2	3	4	5	6	7	8	9	10
Interest per cent	2.72	2.72	2.72	2.72	2.72	2.72	2.72	2.99	3.09	3.09
Average return per year per cent	2.72	2.72	2.72	2.72	2.72	2.72	2.72	2.75	2.78	2.81

If you are interested in investing into the SSB, and wondering how much returns you can get for your desired investment amount, feel free to navigate to this nifty calculator for easy visualization of your future yearly earnings.

Simply select the month of bond issuance, then input the amount you would like to invest. The calculator returns the yearly payouts depending on the cases where you hold to maturity or make a decision to redeem early.

Alternatives to SSB

How does the SSB compare to other alternatives? Here we have a chart to illustrate some of the key differences between the SSB for January 2024, a Fixed Deposit Account offering one of the highest interest rates and returns, as well as the Singapore Government Securities (SGS).

Features	SSB	Fixed Deposit (CIMB)	SGS
Interest Rates	2.81 per cent p.a. if held to year 10	3.55per cent p.a.	Varies
Tenure	10 Years	6 months	2, 5, 10, 15, 20 or 30 years
Liquidity	Redeem anytime, no penalty	Bank charge may be imposed	No early redemption
Minimum Deposit Amount	S$500	S$10,000	$1,000
Maximum Deposit Amount	S$200,000	-	S$3,000,000
Risk Level		Low

From the above, we can see that the SSB offers a lower interest rate at 2.81 per cent but at a much lower minimum deposit amount, at S$500, than the Fixed Deposit Account which has an interest rate of 3.55 per cent and a minimum deposit amount of S$10,000. However, the tenure for the SSB is also much longer, at 10 years, as compared to the tenure for the Fixed Deposit Account which is just six months.

SGS, similar to SSB, is also a type of government-issued bond issued by the Singapore Government. There are various categories of the SGS, each with different tenures, interest rates and coupon rates. Some key differences between SGS and SSB are as follows:

1) SGS can be funded by Cash, Supplementary Retirement Scheme (SRS) funds or CPF Investment Scheme (CPFIS) funds, unlike the SSB which does not support funding by CPFIS funds.

2) SGS is transferable and can be traded on the secondary market — at DBS, OCBC, or UOB branches; or on SGX through securities brokers.

3) No early redemption of SGS is allowed, unless SGS is sold on the secondary market.

The fixed income investment vehicles as above are all viable options for any investor. Depending on your risk appetite, desired tenure and preference for liquidity, any of the alternatives could be a good addition to your investment portfolio.

Step-by-step guide on investing in SSB

Decided to invest in the SSB but not sure how? We have all the steps and what you need laid out below, so that you can invest in SSB easily and on the go!

Any individual can apply for the SSB. However, you need to be 18 and above in order to have a Central Depository (CDP) account, which is required for the application.

A new SSB is issued on the 1st business day of each month. The minimum amount to invest is S$500 and the maximum is S$200,000.

There are two simple ways to apply — either via Cash (DBS/POSB, OCBC, UOB ATMs or Internet Banking and OCBC's mobile banking application) or via Supplementary Retirement Scheme (SRS) by the internet banking portal of your SRS operator.

By cash

1. You will need:

• A bank account with DBS/POSB, UOB or OCBC.
• An individual CDP Securities account with Direct Crediting Service (DCS) activated.

2. Apply either via ATMs or internet banking portals.

• Log in to your bank's internet banking, ATM, or OCBC's mobile banking app. Be sure to have your CDP account number with you.
• Upon application, the amount invested will be deducted from the bank account tied to your ATM card or Internet banking account.
• A S$2 transaction fee applies for each SSB application request.
• Note: requesting for an SSB application does not guarantee an allotment of the SSB.

3. SSB allotment results

• MAS will allot the latest SSB to the applicants on the third last business day of each month (known as Allotment Day). You may check the application results on MAS's website at 3pm on Allotment Day.
• The SSB will then be issued on the first business day of the following month.
• CDP will notify you (by mail) of the amount of SSB that has been allotted to you. You can also check your allotment and holdings through the CDP Internet service or by calling (65) 6535-7511.
• You can manage all your SSB holdings on the My Savings Bonds portal.

4. Refunds for partially or non-filled applications

• You may not be allotted the full amount you applied for, since there is a possibility that the total SSB application amount exceeds the total SSB amount on offer in a particular month.
• The excess cash will be refunded by the end of the second last business day of the month.
• The S$2 transaction fee charged by the bank is non-refundable.

5. Interest Payments

• Interest will be paid to the bank account linked to your CDP account.
• Interest is paid out every six months, on the first business day of each month.
• The cash payments will be reflected in your CDP statement.

By SRS

1. You will need

• An SRS account (you can open an SRS account by visiting one of the three SRS operators (DBS/POSB, OCBC, UOB).

2. Apply via internet banking portals

• Apply for SSB via the internet banking portal of your SRS operator.
• The SRS funds will be locked or earmarked when you apply.
• There will be a $2 transaction fee charged for each application request.
• Take note that application requests cannot be amended and cancelled. SSB also cannot be applied for at the bank counters.

3. SSB allotment results

• MAS will allot the latest SSB to the applicants on the 3rd last business day of each month (Allotment Day). You may check the application results on MAS' website at 3pm on the Allotment Day.
• The SSB will then be issued on the 1st business day of the following month.
• Your SRS operator will notify you by mail, of the amount of SSB that has been allotted to you. You may also choose to check your allotment and holdings with your SRS operator.
• You can also manage all your SSB holdings on the My Savings Bonds portal.

4. Interest payments

• Interest will be paid into your SRS account.
• It will be paid out every six months, on the 1st business day of each month.
• The cash payments will be reflected in your SRS statements.

If you are planning to buy in the SSB this month, be sure to take note of the below application and redemption timelines. The closing date for the Oct 2023 round of applications for SSB will be at 9pm on 26 Oct 2023.

How to redeem: If you already have holdings of SSB and are wondering what the process is like for redemption, feel free to refer to the below steps, whether you want to redeem your SSB or hold till maturity.

Hold to maturity: When you have held your SSB for the full term of 10 years, the principal amount and the last interest payment will be credited into your bank account (cash applications) or your SRS account (SRS applications).

No action is needed and there will not be any $2 bank transaction fee charged.

Early redemption: You can redeem your Savings Bonds in any given month before the bond matures, with no penalty for exiting your investment early. Early redemption of SSB before its maturity will not result in any penalty being imposed.

1) If you have made a cash application for your SSB, simply log in to DBS/POSB, OCBC, or UOB internet banking or ATMs, or OCBC's mobile banking application.

2) If you have made a SRS application, log in to the internet service provided by your SRS operator.

3) Submit the early redemption request by the closing date. You can redeem in multiples of S$500, up to the principal amount. You can redeem more than one bond every month.

The Redemption Timeline is as follows, with the important dates highlighted for your attention, should you wish to make an early redemption of your SSB.

Who should invest in the SSB?

Anyone can invest in the SSB, as it undoubtedly offers many benefits for different groups of investors.

1. Peace of mind with low risk of losing money, you may be an investor desiring high flexibility and liquidity, especially if you are a retiree. The SSB being an investment bond having nearly no risk would be a great choice for you, lending you peace of mind as it secures your capital and maintains its value.

2. Ability to access funds anytime deciding where to park your money is never easy. With the SSB offering the option to redeem and access your funds within a month without any penalty, it makes for an ideal rainy day fund for the more conservative investors.

3. Acts as a source of risk-diversification, for active investors, allocating some funds to SSB could help you hedge against the volatility and risks associated with stocks and other investment classes.

Kick-start your investment journey

Now that we have a fuller understanding of SSB, you might want to continue the lookout for more investment instruments and alternatives! Visit our investments page for tips and beginner-friendly guides for you to kick-start your investment journey! We offer guidance on all things investment-related, such as stocks, bonds, options, forex and a whole lot more!

ALSO READ: Interest rates and returns for Singapore Savings Bonds (SSB) in December 2023

This article was first published in ValueChampion.