1. What are Singapore Savings Bonds?
They are a new type of government bond, which will be launched as part of moves to make low-cost investment options more widely available to retail investors.
A feature of the product is that a bondholder can get his money back in any month, with no penalty imposed. This means investors do not have to decide upfront the duration of their investment.
Normally bonds have a set interest rate and investors can find themselves out of pocket if they redeem them too early.
Singapore Savings Bond interest rates will be linked to the long-term Singapore Government Securities (SGS) rates. But unlike SGS bonds, which pay the same interest rates every year, the new product will start with smaller interest rates that will keep rising, the longer you hold on to the bond.
2. How long can I invest for?
Each Savings Bond has a term of 10 years, but you can redeem them in any given month before the bond matures with no penalty.
3. How much can I invest?
The bonds are targeted at small retail investors with the minimum investment just $500 with additional multiples of $500.
Each individual can apply for up to $50,000 per bond issue and can hold up to $100,000 worth of the bonds at any one time.
If a particular Savings Bonds issue is oversubscribed, there is a possibility you may not get the full amount of the bonds that you have applied for. If this happens, you can consider applying for the next Savings Bond issue in the following month.
4. How much returns will I get?
Interest on the bonds will be linked to long-term Singapore Government Securities (SGS) rates. While SGS bonds pay the same interest every year, Singapore Savings Bonds will pay coupons that step up over time.
The average interest investors will receive over the period they hold Singapore Savings Bonds will match what they would have received had they bought an SGS bond of equivalent tenure.
This means that if you hold your Savings Bond for the full 10-year term, the average interest per year on your investment will match the return if you had invested in a 10-year SGS bond.
The 10-year SGS has mostly yielded between 2 and 3 per cent over the past 10 years.
Singapore Savings Bonds will be issued monthly and the interest rate schedule for each issue will be announced before applications open.
5. When can I start buying Savings Bonds?
Applications for Savings Bonds will open in the second half of 2015.
The Monetary Authority of Singapore (MAS) will announce the launch date one month before application opens for the first Savings Bond issue.
6. How do I apply for Savings Bonds?
To apply for Savings Bonds, you need to have a DBS/POSB, OCBC or UOB bank account and ATM card. This is because applications will be through the ATMs. DBS/POSB customers may also apply for Savings Bonds through internet banking.
You also need an individual (not joint) CDP securities account with direct crediting service activated.
Please note that you must be at least 18 years old to open an individual CDP securities account.
7. Are Savings Bonds interest payments taxable?
Interest income on Savings Bonds is exempt from tax.
8. Am I allowed to transfer or sell my Savings Bonds to someone else?
No. Savings Bonds cannot be transferred to someone else except in specific situations such as in the event of death of the individual or pursuant to a court order. Savings Bonds cannot be bought or sold in the open market, or traded on SGX like shares.