I just saw the news that there was a four-hour queue to put their money into fixed deposits. Interest rates are rising and banks are increasing interest rates to attract funds. Why are people queueing up for such long hours when we can apply for Singapore Saving Bonds online with comparable rates? If you see your parents or elderly loved ones queueing up for fixed deposits, you might want to talk to them about considering SSBs as one of the vehicles for their cash. I will touch on the steps on how to get into SSBs from scratch.
Disclaimer: All comments on this blog site are an expression of opinion. You are recommended to consult with a licensed, qualified financial advisor before making any financial decisions.
A Safe Place With Some Yield
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I believe that the main motivation behind getting both SSBs and fixed deposits is to get a safe place that has a higher interest rate than our savings accounts. For SSBs, you are giving a loan to the government while for fixed deposits, you are giving a loan to the bank. Here is a table comparing the differences between SSBs and fixed deposits.
| SSBs | Fixed Deposits | |
| Yield | Comparable | |
| Loaning Money To | Government | Banks |
| Default Chance | Capital guaranteed
Government default |
Capital guaranteed
Bank default (covered by SDIC) |
| Term | 10 Years | 3 Months – 5 Years |
| Interest Paid | Every 6 months to bank account/SRS account | Depends
Paid out periodically or end of term |
| Minimum Amount Required | S$500 | S$1,000 – S$5,000 |
| Applications Fees | S$2 per tranche | Typically no fees |
| Maximum Amount Allowed | S$200,000 per person | Unlimited |
| Investible Amount Per Tranche | Depends on how much is subscribed
August 2022 limit – S$9,000 September 2022 limit – S$13,000 |
Unlimited |
| Buyable Using SRS? | Yes | |
| Redeemable | Anytime | Only when the period end or will face penalty |
| Partial Redemption | Yes | No |
| Penalty For Early Withdrawal? | No, will get paid pro-rated interest | Yes, might lose some or all interest and incur fees |
| Withdrawal Time | 2nd business day the next month | Immediate |
Arguments For Fixed Deposits
Fixed deposits have the following benefits over SSBs.
- Immediate withdrawal and access to cash, although there might be penalties for early withdrawal
- Unlimited quantum
- Covered by SDIC
Arguments For SSBs
SSBs have the following benefits over fixed deposits
- Interest paid to bank account every 6 months
- No penalty for early withdrawal, pro-rated interest paid up till redemption date
- Able to swap out to better paying tranches without penalties
- Can do partial redemption
- Can start with S$500 per tranche
- Backed by Singapore Government
Questions To Ask Before Deciding Between SSBs and FDs
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Here are some questions to ask before deciding between the two products
- How much do you have to invest?
- What is the difference in interest rates between the two products?
- Are you willing to wait to invest your amount over a few tranches (a few months) instead of immediately?
- Will you need your money immediately vs after 7 – 30 days?
- Do you mind the penalties for early redemption?
- Do you rather interest be paid out regularly or only after the term?
You also don’t have to make a decision between the two products. Depending on your needs and capital, a mixture of both products can help you reach your goals.
Instructions For Getting Into SSBs
In order to purchase SSBs, you will need a CDP account and a local bank account from
- Citibank
- DBS/POSB
- HSBC
- Maybank
- OCBC
- Standard Chartered Bank
- UOB
Step 1 – Set Up A CDP Account
You can skip this step if the applicant already has a CDP account.
This process has improved greatly since I created my CDP account by filling in physical forms about 10 years ago. Now, everything can be done online.
The applicant will need to be at least 18 years old and not an un-discharged bankrupt. Also, it will make it infinitely easier if your Myinfo is already set up as it will help pull data automatically, or else you will need to submit information manually.
Besides that, you will need the following documents
- Bank account number
- Picture of signature
- NRIC number
Just search for “create CDP Account” on Google and just follow the instructions online.
After creating the account, it will take about 1 month for it to get approved.
Step 2 – Purchase SSB
Once your CDP account is created, you will be able to purchase SSBs via internet banking/banking app. From my experience, I wasn’t able to buy SSB using the POSB app but I was able to do so using the OCBC app. But you should be able to do so using internet banking on the banks’ website.
If you are old school, you will also be able to apply for SSBs using ATM.
Things to take note of
- Make sure your CDP account during application is correct
- Check that your total SSB holdings are below S$200,000 (Total SSB holdings = SSB holdings + SSB applied – SSB redeemed)
- You will only be able to apply SSB from 7am to 9pm, Monday to Saturday
- The application period is from 6 pm, 1st business day to 9 pm, 4th last business day
- Once done, just wait for the results that will be released on the 3rd last business day.
- Any oversubscription will be refunded to your bank account by the end of the 2nd last business day
If you already are holding some old SSBs, it might be time to revisit them and change them to the current higher-yielding SSBs.
Lack Of Technology & Financial Savviness
Actually, all that I have said above is useless if the individual doesn’t know how to apply for the financial products by themselves. Those individuals that are less savvy regarding technology and finance will rely on the bank to help them take care of their money. They will just have to look at the rates and depend on the banking officer to help them apply for financial products like fixed deposits. Fixed deposits and savings accounts might be the only two financial products that some people think are safe.
If they are savvy enough, they would also be able to sign up for fixed deposits online without queueing too. You will be able to help your loved ones who are less tech-savvy to apply for financial products online if you are willing to. I understand it will be faster to just take over their account and do it for them but it would be better and more responsible if you explain to them while applying for the financial products. You should let them know what are you applying for them and how you are going to do it. They should understand what they are getting into. This will save your loved ones a lot of time and effort and they can stay at home to watch tv or play iPad instead of queueing for hours at the bank.
TL, DR
SSBs are a good alternative and complement to fixed deposits. To avoid the queue at the bank, you can actually apply for both products online. You will need a CDP account before you can apply for SSB.
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