If you’re a silver with some spare cash and thinking of making it grow, stop and ask yourself: “What’s a safe investment for seniors?”
It is always advisable for those over the age of 55 not to assume too much investment risk as retirement beckons and their runway to earn back losses is limited.
Having a short investment horizon therefore means putting money into relatively safer, or risk-free, investments in order to protect hard-earned retirement nest-eggs built up over decades of work.
Here are some safe options to consider:
Safe investment option 1: Singapore Savings Bonds
Strictly speaking, Singapore Savings Bonds (SSBs) are not really bonds as they are not traded in any market. In other words, there is no market price that could be positively or adversely affected by movements in interest rates or any other factors.
Instead, SSBs are best viewed as flexible deposits (as opposed to fixed deposits) issued by the Singapore Government. They function in similar manner to bank-issued fixed deposits (FDs) with one important difference – unlike FDs you can ask for your money back before maturity with no loss of interest.
There is an issue every month and each is for an SSB that matures in 10 years. The annual interest rates are published at the start of the month and gradually rise the longer the instrument is held.
However, as mentioned earlier, it isn’t necessary to hold the SSB for the full 10 years – it is possible to exit any time and receive the principal plus all the accrued interest, i.e. early redemption is possible without penalty, hence the description that SSBs are really “flexible” Government-issued deposits.
Individuals will need to be at least 18 years old and have a Central Depository (CDP) Account which is linked to a designated bank account into which interest is paid every six months. Note that this is simple and not compound interest. The minimum per person is $500 and maximum across all issues is $200,000.
For the SSB issued in April 2024, these are the interest rates:
| Year | Interest (%) |
|---|---|
| 1 | 2.95 |
| 2 | 2.95 |
| 3 | 2.95 |
| 4 | 2.95 |
| 5 | 2.95 |
| 6 | 2.95 |
| 7 | 3.04 |
| 8 | 3.19 |
| 9 | 3.28 |
| 10 | 3.28 |
To illustrate:
If you were to invest $20,000 in this issue, you will receive $590 (2.95% x $20,000) annually for the first six years.
Since this is simple interest, half or $295 will be credited to your designated bank account every six months starting from 1 Nov 2024 whilst the principal of $20,000 stays the same and will not compound.
In year 7 the annual interest will rise to $608 (3.04% x $20,000), then $638 in year 8 and finally $656 for years 9 and 10.
Your total interest earned will be $6,098 in this example.
- How to buy Singapore Savings Bonds (SSBs)
Application and redemption can be made at the ATMs of the three local banks, DBS, OCBC and UOB or via Internet banking.
A $2 application fee is payable to the bank when applying or redeeming. Look under “Other Services” at the ATM, then under “Singapore Government Securities” and then “Singapore Savings Bonds” or “SSBs”.
Successful SSB applications are credited into the individual’s CDP account on the first working day of the following month.
Note that the same applies for redemptions – your redeemed amount plus accrued interest will be paid into your designated bank account on the first working day of the month after your redemption application.
Those interested can simply Google “SSB” to check the interest offered by subsequent issues on the Monetary Authority of Singapore’s website.
Safe investment option 2: Treasury Bills (T-Bills)
The second type of instrument issued by the government is a Treasury Bill, or T-Bill for short. Like SSBs, the interest is considered risk-free as it is government-guaranteed.
T-Bills are short-term Singapore Government Securities (SGS) issued at a discount to their face value for 6 months or one year.
So instead of paying $100 for a T-bill with $100 face value, the individual pays something less, say $95. At the end of the 6 months or one year, they will be paid $100. The discount is therefore their yield.
If the T-bill in this case was for one year, then the yield would be 5.26% ($100-$95)/$95 x 100.
As of 9 April, the yield on a 6-month T-bill was 3.75% and 3.51% for one year.
To illustrate:
Assuming you submitted a non-competitive bid of $10,000 for the one year T-bill and suppose that the cut-off yield that is announced is 3.51%.
You would have to pay only $96.49, (i.e. $100 – $3.51), for a T-bill with a face value of $100.
So you pay $96.49 now and will receive $100 in a year’s time, which means that your interest is $3.51. Note that your invested yield is actually $3.51/$96.49, which is about 3.64%.
- How to buy Treasury Bills (T-Bills)
You can use cash, Supplementary Retirement Scheme (SRS) funds or the CPF Investment Scheme (CPFIS) to apply for T-Bills at what is known as a primary auction.
Here is how it works:
If you’re keen to buy an upcoming T-Bill, you can either submit a competitive or non-competitive bid. Don’t be put off by these terms as the concepts are relatively straightforward.
Competitive bidders are those who specify both their desired amount and desired yield. These individuals would presumably be those who have tracked earlier issues and developments on the interest rate front.
As such they can be described as being relatively more sophisticated than the average investor. If the eventual yield, known as the cut-off yield, turns out to be lower than the bid submitted by the competitive bidder, then he or she will not be allocated any T-bills from that issue.
Non-competitive bidders are essentially price-takers, i.e. they simply submit applications for the desired sum they would like to invest and are happy to accept the eventual cut-off yield. This would most probably apply to most applicants.
In every auction, non-competitive applications will be allotted first, up to 40% of the total issuance amount. If the amount of non-competitive applications exceeds 40%, the T-bills will be allotted on a pro-rated basis. Thereafter, the allocation will be to competitive applications, starting from the lowest bid to the highest. The yield at which all competitive bids are satisfied is the cut-off yield.
Here is the link to MAS’s website on how auctions are conducted.
Last but not least, investors in T-bills cannot redeem them before maturity but can sell them in the secondary market through DBS, OCBC or UOB by visiting their branches.
You should indicate whether you are using cash, SRS or CPFIS funds.
Please note that prices in the secondary market may change day-to-day according to market conditions and may be higher or lower than what you had paid for.
