THE flexibility and low risk offered by the upcoming Singapore Savings Bonds are ideal for small-time retail investors saving for the long term, financial advisers say.
However, some potential investors told The Straits Times they would prefer to put their money in instruments that offer higher returns.
The bonds will be launched in the second half of this year and issued monthly, as part of moves to make low-cost investment options more widely available to retail investors.
A key feature is that a bondholder can get his money back in any month, with no penalty imposed.
People will be able to apply for each bond issue with as little as $500, and up to $50,000. They will be able to hold up to $100,000 of Savings Bonds at a time, the Monetary Authority of Singapore (MAS) said on Monday.
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 10-year SGS has mostly yielded between 2 per cent and 3 per cent over the past 10 years.
Mr Christopher Tan, chief executive of financial advisory firm Providend, said the instrument is "a no-brainer" and "people will probably be rushing for it".
"Usually capital-guaranteed instruments have a lock-in period (during which investors will not be able to withdraw their funds), but this does not. You can have your cake and eat it too."
Mr Alfred Chia, chief executive of financial advisory firm SingCapital, said the Savings Bond's high level of liquidity could come in useful when saving for emergencies, as funds can be quickly withdrawn.
He also noted that the instrument is ideal for retirees, who should not be taking on high levels of risk.
The Singapore Savings Bonds are also a safer option than corporate bonds, he added. "The companies might be big names but there is still a default risk."
Financial advisers said the cap of $100,000 per bondholder is appropriate as the programme is targeted at retail investors. Over 90 per cent of individual bank deposit accounts have balances of $100,000 or lower, the MAS said.
"Those with more than $100,000 should be able to take care of themselves," Mr Chia said.
Housing agent Sandra Ong, 43, intends to invest about $20,000 from her children's savings accounts.
"It's safe and there's a guarantee for my funds," she said.
However, businessman Phillip Yeo, 59, said he is still undecided.
Mr Yeo, who already invests in stocks, funds and bonds, said the instrument would work best for those with long-term savings plans.
Mr Toh Wee Sin, 48, said he is usually willing to take on more risk by investing in stocks and properties.
Mr Toh, who is self-employed, said he would consider the Savings Bond "because of the security it provides", and would put in $100,000 if there are "good returns".