• Fixed Deposits (FD) vs. Singapore Savings Bond (SSB)

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    Fixed Deposit accounts are the so called fail-proof method of keeping your money safe while you also earn some amount as interest. The Singapore Savings Bond is an initiative of the Monetary Authority of Singapore (MAS), which is being issued since September 2015.

    We are generally wary of trying new options in the financial domain. Should you be switching gears and investing in SSBs instead of FDs? Read on to find out the difference between the two.

    Eligibility:

    Most banks in Singapore allow individuals above the age of 18 years to open a fixed deposit account. There are, however some banks, that allow minors aged 12 years or 15 years to open a fixed deposit account in their name.

    Singapore Savings Bond can be opened in the name of individuals above the age of 18 years.

    Minimum amount:

    The minimum amount required to open a fixed deposit account varies from bank to bank. Most banks in Singapore accept S$5,000 or even S$1,000 in certain cases, to start a fixed deposit account.

    Singapore Savings Bond can be started with an amount of S$500, and further investment should be in multiples of S$500.

    Maximum amount:

    The maximum amount that one can place in a fixed deposit account varies from bank to bank. The amount could go up to 1 million units of the currency concerned.

    The maximum amount you can invest in each bond is S$50,000. The maximum holding per individual for an SSB is S$100,000.

    Interest earnings:

    The amount in the fixed deposit account will earn interest on the amount that you have deposited. You will receive the interest after the tenure you have fixed.

    With the Singapore Savings Bond, you can earn interest every 6 months after issuance.

    Interest rate:

    The interest rates offered by banks before you start a fixed deposit account are usually fixed for the entire tenure. Banks in Singapore usually offer an interest rate ranging from 0.10% to 1.45% p.a. for a period of 12 months.

    The Singapore Savings Bond too provides fixed interest rates before you lock-in the amount for 10 years. This could easily earn you an interest of about 2% to 3%.

    Tenor:

    Banks allow you to lock in the tenure while beginning the fixed deposit account. This usually ranges from 1 day to almost 60 months in Singapore.

    The Singapore Savings Bond will hold your money in bond for a period of 10 years.

    Tax:

    The interest earned from fixed deposit account is taxable if your account is with any non-approved bank. But if your FD is in a qualifying bank, you can earn tax relief on the interest you get.

    You don’t have to pay any tax on your amount in the Singapore Savings Bond or the interest earned.

    Uses:

    A few banks in Singapore allow you to pledge the fixed deposit account as a collateral for a loan.

    The amount in Singapore Savings Bond cannot be pledged as collateral for any loan.

    Premature withdrawal:

    Usually banks may charge you for premature withdrawal of funds from a fixed deposit account. The fee charged is, however, at the sole discretion of the bank.

    SSB allows you to redeem the amount before they issue a new bond in a particular month.

    Risk:

    Banks are responsible for the fixed deposit accounts, whereas SSBs are with the Government of Singapore.

    Returns:

    A fixed deposit promotion account provides you fixed interest rates for your amount on the duration you decide. SSBs let your money grow every year; meaning, the interest rates increase after every year.

    However, SSBs are for holding your savings and not for investing. If you are willing to put away your money for a longer period of time, SSBs are a great option. If not, you have the option of fixed deposit accounts that offer shorter tenures.

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