You will be able to read an SSB's interest schedule and explain why the rate rises each year you hold it.
Farah has S$10,000 sitting in a savings account that pays her almost nothing. A friend tells her to "just put it in SSB, the rate goes up every year". Farah looks at the MAS page and sees a table of ten rates, a column called average return per year and a lot of dates. She closes the tab. This lesson is the ten minutes she needed to read that table with confidence.
A Singapore Savings Bond, or SSB, is a bond issued by the Singapore Government for individuals. Like every bond in lesson 1.1, A bond is a loan with a fixed timetable, it has a face value, interest payments and a maturity. The maturity is ten years from the issue date.
What makes it different is the interest. An ordinary bond pays the same coupon every year. An SSB pays a rate that rises over time, so year two pays at least as much as year one, year three at least as much as year two, and so on. This is called step-up interest. The longer you hold, the higher the rate you are being paid in that year.
The other difference, covered in lesson 3.3, is that you can get your money back in any month without losing any of it. Those two features together explain why SSBs are built the way they are. The step-up is the Government's way of paying you more for staying, since you are free to leave.
A new SSB issue comes out every month, and each one has its own schedule of ten yearly rates. Those rates are not chosen at random or set by a bank. They are linked to the average yields on Singapore Government Securities in the month before the issue, which MAS publishes.
The idea, in plain terms, is that holding an SSB for a given number of years should earn you roughly what a government bond of that length was paying when the SSB was issued. If ten-year government yields are well above one-year yields, the SSB schedule climbs steeply. If long and short yields are close together, the steps are small and the schedule looks almost flat. MAS explains the method on its SSB pages if you want the detail.
Two things follow. First, every issue is different, so your friend's SSB from last year may have a very different schedule from the one open today. Second, once your issue is set, its schedule never changes. Rates in the economy can rise or fall afterwards, and your ten rates stay exactly as printed.
Here is a made-up schedule to practise on. The yearly rates for years one to ten are 2.50%, 2.55%, 2.60%, 2.70%, 2.80%, 2.90%, 3.00%, 3.05%, 3.10% and 3.15%.
The year one figure, 2.50%, is what you earn in the first year after issue. Interest is paid every six months, so on S$10,000 Farah would get S$125 after six months and another S$125 after twelve. In year ten, at 3.15%, each half-yearly payment would be S$157.50. Held for the full ten years, the made-up schedule pays S$2,835 of interest in total on S$10,000.
Next to the yearly rates, the MAS table shows the average return per year for each holding period. That column answers a more useful question: if I hold this bond for three years and then redeem it, what have I earned per year on average? In the made-up schedule, the plain average of the first three rates is 2.55%, and over all ten years it is 2.835%. The figure MAS prints works the average out on its own published basis, so it can differ slightly from a plain average. Use the MAS figure when you make decisions.
The ten-year average is the number to compare with other long-term safe options. The one or three-year average is the one to compare with a fixed deposit or T-bill if you think you will need the money sooner. A common mistake is to look at the year ten rate, 3.15% here, and treat it as what the SSB pays. You only earn that rate in year ten, and only if you are still holding.
Interest is paid every six months, on dates set out for each issue. For SSBs bought with cash, it goes into the bank account linked to your CDP account. For SSBs bought with SRS money, it goes back into your SRS account. Lesson 3.2, Applying for an SSB and the limits that apply, covers the two ways to pay.
That timing is worth knowing for budgeting. An SSB gives you a small, predictable sum twice a year, not a monthly drip, and you will not see interest for the first six months.
Farah went back to the MAS page with this in hand and found she could read the whole table in under a minute. Open the latest issue's schedule now and pull out the three figures that matter for most decisions: what you would earn per year if you held for one year, for three and for the full ten.
Download the interest schedule for the latest SSB issue from MAS and write down the yearly rate and average return at years 1, 3 and 10.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).