The individual limit for holding Singapore Savings Bonds (SSBs) has been lifted from $100,000 to $200,000, it was announced yesterday.
Investors will also be able to buy the bonds using funds from their Supplementary Retirement Scheme (SRS), a voluntary savings plan that enjoys tax relief.
Both changes take effect from Feb 1 next year, said the Monetary Authority of Singapore (MAS).
The announcement followed calls from the public to open the bonds - an investment instrument viewed by many as safe houses - to SRS funds.
The MAS said: "Taking into account public feedback, MAS has worked with the banks to enable SRS funds to be invested in SSB.
"This will expand the range of products available to SRS members and help them save and plan for retirement."
SSBs have seen sustained interest since their launch in October 2015.
Demand has outstripped supply in every monthly SSB auction, except for one month.
The strong response has prompted the MAS to raise the amount of bonds for sale three times since April. The monthly issue now is $300 million, double April's $150 million.
About 100,000 individuals have invested about $3.7 billion in the bonds since the 2015 launch, the MAS said.
Ms Selena Ling, OCBC Bank head of treasury research and strategy, said the revised SSB rules will definitely be welcomed by individual investors and likely lift overall demand for the bonds.
iFast senior fixed income analyst Ang Chung Yuh feels the same way. He expects SSB subscription rates to rise significantly, given that one-third of SRS funds reside in cash, which earns negligible returns.
By comparison, the 10-year SSB pays an average 2.45 per cent if held to maturity.
The rule change means a huge new pool of funds can now be funnelled into SSBs.
About 141,000 SRS account holders have around $8.15 billion in total stashed in their accounts.
Singaporeans make up 83 per cent of these account holders, with permanent residents at 12 per cent and foreigners at 5 per cent.
About 33 per cent of SRS funds is held in cash, followed by 26 per cent in shares, real estate investment trusts and exchange-traded funds. Insurance products account for 24 per cent; unit trusts, 9 per cent; fixed deposits, 1 per cent; and others, 7 per cent. These proportions could soon change following the SSB rule change.
Though some financial advisers see the revised SSB rules as a chance for SRS savers to diversify their portfolios, others believe they could eat into bank fees from the sale of wealth management products while competing with their deposits drive.
Mr Ang said the rule change will enlarge the market as a whole rather than eat into the sales of other products.
But Jefferies Singapore equity analyst Krishna Guha said: "Incrementally, it will be competition for bank deposits and/or investment products for which banks act as distribution platforms."
