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A new product is going to be available soon for people who are risk averse but are looking for better returns. Enter the Singapore Savings Bond!
Singapore Savings Bonds will offer the higher returns of a long-term bond and give what investors call a term premium, while retaining the flexibility of a shorter-term deposit, and the safety of an instrument guaranteed by the Government. (Senior Minister of State for Finance, Josephine Teo)
Source: CNA
In summary:
1. Interest rates linked to long term Singapore Government Securities.
2. Ability to get back our money at any time without penalty.
3. A "step-up" feature will pay long term savers more interest with each passing year.
4. Guaranteed by the Singapore government.
This could spell trouble for banks here as I foresee savers moving their money from fixed deposits to these Singapore Savings Bonds.
Well, I know I am really looking forward to this. Aren't you?
Updates:
A. The name is Bond, Singapore Savings Bond (Part 2).
B. The name is Bond, Singapore Savings Bond (Part 3).
C. Singapore Savings Bond: Good or Not?
Related posts:
Bloggy Award
24 comments:
You beat me to blogging about it. I will just put up a link to your post :P
The timing of the launch of this SSB is an indicator that interest rates are rising soon.
Im very excited about this!
Perfect if it comes with tax relief!
Wow ak, isn't this better than print money in cpf? Any idea what is the bond coupon rate for long term bonds?
Hi E H,
I agree with your observation that interest rates are rising.
I didn't know you have a blog. I will visit. :)
Hi Rebel,
Buy the bond and get income tax relief? I think that would be too good to be true. ;p
Hi Ray,
This is perfect for you, isn't it, given the context of our recent email exchanges? LOL. Lucky you. :D
It is said that the interest rate will be linked to long term SGS' coupons. So, this is a clue, perhaps.
The 10 year SGS has a coupon of 3% and the 30 year SGS has a coupon of 2.75%, when I checked. These are higher than the 2.5% interest offered by the CPF-OA. :)
Two new frameworks as well as a tax deduction have been proposed, and MAS and SGX are targeting to implement the proposals in the second quarter of 2015.
http://www.businesstimes.com.sg/government-economy/govt-to-offer-singapore-savings-bonds-for-local-investors
I can't help but think of the saying, "If something seems to good to be true, it probably is".
I nominate AK to thoroughly scrutinize this instrument once details are released.
Hmm it provides a different option but bonds don't have the compounding effect like cpf. And it requires a big outlay upfront. Any idea what is the minimum amount to buy? Cheers.
I am smoking weed if I hope the returns is 4% sama sama with CPF-SA returns?
Wow! Higher than CPF's 2.5%? I will withdraw my CPF OA and put them into the bond.
Hi Rebel,
The tax deductions/concessions are probably for corporations that choose to issue retail bonds under a new framework that make their bonds more easily available to retail investors.
I don't think these tax deductions are for buyers of the SSB. Of course, I can hope. :)
Hi E H,
We will have to wait for more details but my guess is that the interest rate which the SSB will offer is probably not going to be higher than what the CPF-OA is paying as its base rate (i.e. 2.5%) especially when the SSB has no lock up period.
I will look hard at this if it should be introduced according to plan but you need to nominate a finance professional to scrutinise it. I am not up to the job. -.-"
Hi Ray,
There is no information regarding any minimum sum required to participate in this so far. My guess is that it will be a small figure so as to benefit the common people.
We can look at the "step up" feature as providing some compounding effect. This will benefit long term savers. :)
So, for people who are saving for a specific event (a child's university education or the down-payment for a property, for examples) a few years down the road and cannot afford to take risks with the money, this could be a good choice. ;)
Hi Siew Mun,
I would have to report you to the authorities. It is for your own good and the good of your children. I am very sorry. ;p
hmm I think you're right, as you always are. :D
Although I'm pretty sure it's going to be less than CPF OA interest rate given than it is so flexible in withdrawing.
But it is principle guaranteed, it really is an attractive choice for folks like me!
Thanks for sharing the info and insights!
Hi Sanye,
I very much doubt it is going to be higher than the 2.5% base rate from the CPF-OA. Haha... Let's wait and see. ;)
Hi Ray,
You are very kind but I cannot accept that compliment. I can accept that I am right more than I am wrong but I am definitely not always right. -.-"
This is a good tool for you and your purpose, I agree. Risk free and volatility free, it gives you peace of mind too. :)
I think that a coupon of 1.5% to start with won't be unrealistic. Just a guess. ;p
Having said this, we have to keep an eye on inflation too. If we expect inflation to average 3% per annum, then, the CPF with its 2.5% to 5% interest rates (and its lock up feature) could really be a better choice when it comes to planning for long term needs such as retirement adequacy.
If you should decide on the CPF route and are thinking of earmarking the funds for some significant event in future, give the CPF Board a call to make sure that everything you have in mind is going to work out. Remember, I have never been in your position before. ;)
don't worry.
I know you're not a licensed financial planner ;)
I'm very familiar with your disclaimers :D
Hi Ray,
OK, that gives me peace of mind. LOL. ;p
Gambatte! :)
http://m.todayonline.com/singapore/singapore-announces-new-govt-bond-scheme-retail-investors
Get for your niece?
Hi Rebel,
This could be a place to park some funds either from our war chest or emergency fund. :)
Actually, I would be quite surprised if the SSBs provide returns similar to what the CPF-OA is providing. Then, again, it would be a nice surprise. :)
Investors can put in a minimum of S$500, and in subsequent multiples of S$500, for 10 years. There will be a limit to the total investment amount so that it can maximise participation and to ensure a broad reach, said MAS.
Investors can opt for a monthly issuance of their money, and they can choose to withdraw all of their money any time, with no penalty. The principal sum and any accrued interest will be paid to them, if they choose to redeem their funds. This means investors need not have to decide upfront on how long they wish to invest.
Mr Vasu Menon, vice president of Wealth Management at OCBC Bank, said: "Relative to Singapore Government securities, the Singapore Savings Bond is very attractive, because it is able to offer the same yield for a similar tenure, without the risk of capital depreciation.
"You enjoy the yield, plus when you get out or redeem within that two-year period, you do not suffer the capital loss. This is a very important feature of the bond, because it offers investors psychological comfort, psychological security and it gives them an avenue to get out whether they lose money or otherwise."
Those in the Savings Bonds programme will earn interest that is linked to long-term Singapore Government Securities (SGS) rates. The Savings Bonds’ interest rates will increase over time. This means the average interest rate will be higher the longer the Savings Bonds are held. The SGS yield for the last 10 years has been between 2 and 3 per cent per annum, said MAS.
Given the way the bond encourages long-term investment with attractive rates, industry watchers added they expect the new Savings Bonds to put pressure on banks' fixed deposits (FDs).
Source:
http://www.channelnewsasia.com/news/singapore/details-on-savings-bonds/1756338.html?cid=fbsg
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