Purchasing a bond means loaning a certain amount of your earned money to a government or corporation. These funds are, then, used for several things like funding a business’s growth plans, acquiring new firms, or helping a nation build its infrastructure.
A Singapore Savings Bond (SSB) is backed by the Government of Singapore, where you can get back your full investment amount with no capital losses. DBS offers a long-term savings option with safe returns. The longer you hold a bond, the higher the return.
Features and Benefits of DBS SSB
- Invest for up to 10 years, starting from S$500 and earn high interests.
- Freedom to exit your investment early without any penalty.
- Earn step-up interest on your deposit amount until you withdraw.
- SSBs are a type of Singapore Government Securities (SGS) which are suitable for individual investors.
- The interest is paid every six months, based on the current SGS yields.
- Such bonds cannot be sold or bought in the secondary market.
- Savings bonds are a viable option to save for your retirement and diversify risks.
How to Buy Savings Bonds
Before you apply for a bond, you need to open a DBS Bank account. You will also need to link your CDP Securities to your DBS Bank account via Direct Debiting Services (DCS).
You can apply through a DBS ATM or iBanking. Make sure you have your CDP number before you apply. The investment amount will get deducted from your DBS account linked with your ATM card or chosen iBanking account. Savings bonds cannot be applied over-the-counter in person.
Once you apply, the Monetary Authority of Singapore will allot the savings bonds to you on the third last working day of the month. If your applications exceeds the amount on offer in a month, you might not receive the entire amount you applied for. The extra cash will be refunded by the second last working day of the month.
The bonds will be issued on the first working day of the following month. You will get a notification from CDP on the amount allotted to you. The first interest on your savings will be paid after six months from the date of issue. The interest amount will be credited to your DBS Bank account.
When to Apply for Savings Bonds
You can apply for SSBs from 6:00 p.m. on the first working day till 9:00 p.m. on the fourth last working day of the month. Every time you place a request for a bond, you will have to pay a non-refundable fee of S$2.
How to Redeem Bonds
Once your bond matures after 10 years, your last interest and principal payments will be credited to your DCS account. In case you want to redeem your bonds before the maturity date, you can do so without any penalty charges for early redemption.
To redeem your Savings Bonds, you need to:
- Submit the redemption request via a DBS Bank ATM or an iBanking account.
- Redeem in multiples of S$500 or up to an amount you have invested per bond.
- Pay the transaction fee of S$2 for each redemption.
Please note: You can redeem more than one bond in a month. Also, you cannot cancel or change any submitted redemption requests.
During a scheduled interest payment, if you redeem your bond, you will get the interest amount along with the redemption amount. However, if you request for an early redemption, then the interest amount payable to you will be calculated on a pro-rata basis. This kind of interest is called an accrued interest, where you earn an interest on your bond since the last payment.
Interest Rates as of August 2018
The issuance size of SSB per month has been increased to S$250 million. The table below shows the interest you can earn for up to 10 years:
|Average return each year||1.78%||1.97%||2.10%||2.21%||2.29%||2.37%||2.43%||2.48%||2.52%||2.57%|
Let us Illustrate
Let’s say you invested S$20,000 on a Savings Bond in the month of August 2018. According to the SSB programme, your bond will mature in August 2028. You will earn 2.57% each year, which comes up to a total of S$5,202.
However, if you redeem the bond early, say in January 2021, then you will earn an effective interest rate of 2.03% each year, which is a total of S$985 for two year five months.