Fixed Deposit Vs Singapore Savings Bonds: Which Should You Go For?

Singapore has been experiencing a boom in interest rates for fixed deposit accounts. Is it a viable option for investment and how does it compare to Singapore Savings Bonds (SSB), which has experienced a similar boom as well? We analyse it for you in this article.

With inflation at an all-time high, people in Singapore are on the lookout for investment instruments with higher interest rates and low-to-moderate risks.

After all, the stock market isn’t particularly stable in 2022.

In this article, we are going to look at fixed deposits in Singapore as well as the Singapore Savings Bonds (SSB), both of which have recently increased their interest rates significantly.

Table of Content

Singapore Savings Bonds – What makes SSB attractive to investors?

Singapore Savings Bonds (SSB) were first introduced back in 2015. 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.

Rising Interest Rates

In 2022, SSB came into the limelight when its interest rates spiked if held to full maturity.

From 1.78% p.a. in January, SSB interest rates increased to 3.47% p.a. In December 2022.

MonthInterest Rate (p.a.)
Information from MAS

Lower Variance in Step-Up Interest

Another factor to note for SSB is that the variance of the step-up interest is smaller for recent batches of issuance.

This makes it more forgiving for users who need to pull out of their SSB prematurely.

Month1st Year Interest10th Year InterestVariance
January 20220.45% p.a.2.44% p.a.1.95% p.a.
December 20223.26% p.a.3.58% p.a.0.32% p.a.

Assuming that an individual decides to withdraw his money from his January 2022 SSB after two years, he will only be able to get an average return of 0.86% per year, a 52% drop from the 1.78% p.a. expected return.

An individual withdrawing his money from the December 2022 SSB after two years will get an average return of 3.26% p.a., just 0.32% p.a. (or 10%) below the expected return of 3.47% p.a.

Read Also: Rising Interest Rates and Returns for Singapore Savings Bonds (SSB) - Should You Start Investing In It?

Fixed Deposits – What makes it attractive to investors?

Fixed deposits are also known as time deposits. They generate guaranteed interest over a specified duration for the money that you deposit in the bank. The interest is paid out at regular intervals, be it quarterly or annually.

While you’re able to withdraw your money, doing so before the tenure is up will reap you less or even no interest at all.

FD rates differ month to month, depending on when you open your account, and the rate you earn depends on your tenure and the amount you deposit.

Typically, tenures for FDs range from as short as a month to as long as four years. Naturally, more attractive interest rates will be accrued to longer tenures of at least two years.

Read Also: 4 Low-Risk Investment Alternatives to Fixed Deposits

Rising Interest Rates

Just like any other investment tool, the reason why fixed deposits are in the limelight now is due to rising interest rates.

On 6 Oct 2022, it was reported that banks in Singapore lifted their fixed deposit interest rates to a 24-year-high.

BankMin. DepositDurationInterest (p.a.)Valid Until
DBS$20,0005 months3.80%Further notice
Standard Chartered (Online)$25,000 (Fresh Funds)12 months3.10%30 Nov 2022
UOB$20,000 (Fresh Funds)12 months3.90%30 Nov 2022
OCBC$20,000 (Fresh Funds)12 months3.40 - 3.90%Further notice
Bank of China (Mobile banking)$5,00018 months3.25 - 3.40%Further notice
ICBC (E-banking)$50012 months3.75%Further notice
RHB (Mobile Banking)$20,00012 months3.90%Further notice
HSBC$30,000 (Fresh Funds)12 months3.20%30 Nov 2022
Hong Leong Finance$20,00018 months3.18 - 3.30%Further notice
CIMB Singapore$10,00018 months3.75 - 3.80%30 Nov 2022
Citibank$50,000 (Fresh Funds)12 months3.40%Further notice
Maybank$20,00024 months3.20%Further notice
Information accurate as of 16 Nov 2022

Generally, individuals can expect interest rates ranging from 3.10% p.a. To 3.90% p.a. for fixed deposit durations ranging from 5 months to 24 months.

Minimum deposits required for fixed deposits in Singapore, however, are typically S$20,000 and above, with only a few exceptions.

Namely, ICBC with a minimum deposit of $500, BOC with a minimum deposit of $5,0000 and CIMB with a minimum deposit of $10,000.

Fixed Deposit vs SSB, Which Should You Go For?

To help you choose between fixed deposit and SSB, we look at the various features of each investment tool.

FactorsSingapore Savings BondsFixed Deposits Singapore
Duration10 years5 months to 24 months
Interest rates3.47% p.a.
(December 2022 SSB Interest Rate)
3.10 - 3.90% p.a.
Risk LevelLowLow
Penalty for early withdrawalNone (except to forgo stepped-up interest)Possible early withdrawal fee + prorated interest or forgoing of interest earned
Minimum DepositS$500$500 to $50,000 depending on the banking institution
Ease of AccessHighHigh

Generally, both SSB and Fixed Deposits in Singapore are low-risk investment tools that are easy to understand and easily accessible.

Main Factors To Take Note Of

The main differences to take note of for individuals considering between the two investment tools are the duration of investment, liquidity and the minimum deposit.

For individuals who are looking to lock in their money for a shorter period of time, fixed deposits would be a more attractive option to them. However, they must make sure that they are able to leave the money in the account for the stipulated period. Otherwise, they might incur penalties that would let them earn zero interest.

Individuals who do not have an emergency stash of at least six months of expenses are advised to go for SSB instead as there are no early withdrawal penalties. With the lower variance in SSB step-up interest rates, users are still able to enjoy moderate returns despite the early redemption of their SSB.

The capital required (minimum deposit) required for fixed deposits in Singapore is generally higher than SSB, which only requires a minimum of S$500 to start investing. While there is a bank, ICBC, which offers fixed deposits starting from S$500 for a nice return of 3.75% p.a., most banks require a minimum deposit of S$20,000 and above.

Ultimately, it also depends on the investment horizon for your money. If you require the money back within a short period, a fixed deposit would be a better option for you. However, if the money is meant for long-term goals, such as your retirement savings, having your money locked into SSB at an acceptable interest rate for a longer period of time might not be a bad thing.

Other Investment Tools

Now that you have learned about the main differences between fixed deposits in Singapore and Singapore Savings Bonds (SSB), you might also be interested in how T-Bills work and whether it can be a suitable investment instrument for you.

On a separate note, if you are interested in other forms of investing, you can check out our specially-curated guides on the best trading and online brokerage platforms in Singapore in 2022.

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Tan Boon Hun

Boon Hun spent over five years in the content marketing space as the managing editor of Goody Feed creating interesting and relevant content for the social media generation. In 2022, he moved to the FinTech space while remaining true to his roots, intending to bring financial literacy to more people in Singapore. When not doing his work, he can be found watching people build homes on YouTube.