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

How do fixed deposit accounts and Singapore Savings Bonds stack up against each other? Here’s how each can fit into your investment portfolio

Singapore's Central Business District

With inflation still among all-time highs in Singapore and borrowing costs remaining at an elevated level, people here have been on the lookout for investments with higher interest rates and low-to-moderate risk levels.

Even though stocks have been setting new all-time highs as well, the larger cost of living means folks would either have less to invest or prefer options that preserve their wealth while still being relatively liquid.

In this article, we’ll look at fixed deposits in Singapore as well as the Singapore Savings Bonds (SSB). Both have increased their interest rates significantly across 2022 and 2023, thanks to Singapore following the US’s interest rate policy.

Singapore Savings Bonds: What Makes the SSB Attractive to Investors?

The Singapore Savings Bonds (SSB) was first introduced back in 2015. Fully backed by the Singapore Government, no capital loss will be incurred on your bond purchases and you can always get your investment back in full. That’s right. The SSB does not bear any early withdrawal penalties or redemption charges upon maturity.

To be precise, the SSB is a long-term bond offering step-up interest, meaning that the longer one invests in it, the higher the yearly interest you receive. It’s also flexible because you can redeem your bond at any time with no penalties, as mentioned above.

In December 2022, the spotlight shone brightly on the SSB because of its 3.47% p.a. interest rate, a significant increase from January 2022’s 1.78% p.a. rate. Fast forward to late-2023 and early-2024, and interest rates are still holding up well.

DateAverage Interest Rate (p.a.)
March 20243.04%
February 20242.81%
January 20243.07%
December 20233.4%

Source: Monetary Authority of Singapore

Not only has the interest rate of recent bond issuances kept up with the 3.47% p.a. peak in December 2022, the variance of the step-up interest has remained relatively small too. This makes it more forgiving for investors who need to redeem their SSB prematurely. Let’s use the March and February 2024 bonds as examples:

Date1st Year Interest  (p.a.)10th Year Interest (p.a.)Variance
March 20242.74%3.26%0.52% p.a.
February 20242.72%3.09%0.37% p.a.

An individual withdrawing his money from the March 2024 SSB after two years will get an average return of 2.74% p.a., a variance of just 0.52% p.a. below the 10th year’s interest rate of 3.26% p.a.

Related: T-Bills vs Singapore Savings Bonds vs Fixed Deposits vs Endowment Plans: Which Investment is Right For You?

Fixed Deposits: What Makes it Attractive to Investors?

Fixed deposits are also known as time deposits. They generate a guaranteed interest over a specified duration for the money that you deposit in the bank. The interest and principal is then repaid to you in full after the fixed deposit reaches maturity.

While you’re able to withdraw your money in the meantime, doing so before the maturity date will reap lesser or even no interest at all.

Fixed deposit interest rates differ from month to month, and across banks as well. What’s more, the actual interest rate you enjoy depends on how long and how much you deposit. Although fixed deposit tenures typically last from a month to four years, the best interest rates lie in between. It’s not about depositing the most amount of money for the longest period of time.

To illustrate this, here’s a quick snapshot of the current fixed deposit interest rates across Singapore’s three banks: DBS, UOB, and OCBC. However, do note that rates change frequently, as mentioned above.

Max. Interest Rate in March 2024 (p.a.)3.2%3%3%
Min. Deposit AmountS$1,000S$10,000S$30,000
Min. Tenure12 months6 months6 months

Information accurate as of 1 March 2024

As you can see, each bank implements a wildly different minimum amount and tenure for their fixed deposit in order for you to enjoy the best interest rate they can offer. It’s crucial for you to compare between the different banks before you part with your capital. Check out all the latest fixed deposit rates and promotions.

Related: 4 Low-Risk Investment Alternatives to Fixed Deposits

Fixed Deposit vs SSB, Which Should You Go For?

To help you decide between a fixed deposit and SSB, let’s take a look at the various features of each investment:

Singapore Savings BondsFixed Deposit
Duration10 years1 – 48 months
Interest Rate (p.a.)2.81 – 3.4% (Based on examples above)3 – 3.2% (Based on examples above)
Risk LevelLowLow
Early Withdrawal PenaltiesNone, except forgoing the stepped up interestPossible early withdrawal charges and prorated interest. Possibility of completely forgoing interest earned too.
Min. DepositS$500S$500 – S$50,000 (Depending on bank)
Ease of AccessHighHigh

Generally, both the SSB and fixed deposits in Singapore are low-risk investments that are easy to understand and easily accessible. In an investment strategy, these are generally employed as wealth preservation tools. If you’re saving up for an investment or business opportunity down the road or simply don’t have the investment horizon for riskier assets, these are excellent bets.

Other Factors to Take Note of

compound interest grow money interest savings investing
Source: Unsplash

The main differences to take note of if you’re deciding between the SSB and fixed deposits are the:

  1. Investment duration
  2. Liquidity
  3. Minimum deposit

For individuals looking to lock in their money for a shorter period of time, fixed deposits would be a more attractive option due to the variety of tenures banks offer. However, ensure you’re indeed able to leave the money in the fixed deposit account for the stipulated amount of time. Otherwise, you might incur the aforementioned penalties and earn zero interest.

The SSB is advisable if you do not have a solid emergency fund going. This would usually consist of six months of your salary. Remember, the SSB has no early withdrawal penalties, making it a safe spot to lock up cash you won’t need in the meantime. With the lower variance in SSB step-up interest rates, you’re still able to enjoy moderate returns even if you make an early redemption.

To elaborate on another key difference between the SSB and fixed deposit, the latter generally requires a higher minimum deposit. If you wish to purchase an SSB, all you need is S$500. As mentioned earlier, there might be banks allowing you to deposit a minimum of S$500 for fixed deposits, but it’s usually much higher than that.

Lastly, your decision also depends on your investment horizon. If you need the funds soon for your business or an investment, a fixed deposit is better. However, if the money is meant for longer-term goals, such as your retirement, having it locked into an SSB at an acceptable interest rate for a longer period of time would be better.

Related: Safe-Haven Investments— What Are They and How Can You Invest in Them?

Other Investment Tools Available For You

Now that you’ve learned about the main differences between fixed deposits in Singapore and the SSB, you might also be interested in how T-Bills work and whether they can be suitable investments for you. These are conservative instruments as well, and it’s worth researching them to discover how what role they can play in your portfolio.

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

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Cover image source: Unsplash

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