The Singapore Savings Bond (SSB)
It is a special Singapore Government bond, issued by the Singapore Government and sold to the public as a form of savings.
Introduced as another form of investment and savings plan for people living in Singapore
The Singapore Central Provident Fund (CPF)
It is a compulsory savings plan for all Singaporeans and PR living and working in Singapore.
A portion of an individual's monthly income is channelled into their respective CPF accounts for different purpose; for buying a house, for retirement and for medical expenses,
Differences between CPF & SSB
| Differences | CPF | SSB |
|---|---|---|
| Withdrawal | No Each year, you can only contribute to your CPF at max $37,740 - inclusive of both your compulsory contribution and your voluntary contribution. |
Yes You will get back the money next month |
| Contribution/ Investment Limit |
Yes Each year, you can only contribute to your CPF at max $37,740 - inclusive of both your compulsory contribution and your voluntary contribution. |
Yes You can buy at max $50,000 worth of bonds each month. |
| Holding Limit | No You can save as much money as you like in your CPF. |
Yes You can at max own $100,000 worth of bonds in total |
| Interest Rates | Up to 3.5% on your Ordinary Account Up to 5% on your Special, Medisave & Retirement Accounts (SMRA) Up to 6% on your SMRA if you are above 55 years old Interest rates are fixed |
Less than 1% in your first year Increases every year Reaches 3+% in the 10th year Interest rates depend on market conditions. |
| Interest | Compounding | Non-Compounding |
| Returns | Beats Inflation With inflation on average of about 3% per year compounding, CPF's SMRA account provides higher interest rates than inflation, meaning you do not lose your purchasing power over time |
Probably will not beat Inflation With an interest of 2+% per year over the long-term, it is less likely for SSB to beat inflation rates. You are likely to maintain purchasing power or lose a little to inflation |
| Purpose | Save for long-term Save for Retirement Save for medical expenses Save for home payments |
Save for short-term Save for an expense that will occur in a few months or years time, like a wedding, or home down payment |
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Similarities between CPF & SSB
| Similarities | CPF | SSB |
|---|---|---|
| Guaranteed Principal | By the Singapore Government, one of the remaining few AAA-rated countries. Confirm can repay you back the money you put/save with them |
|
| Guaranteed Interest | By the Singapore Government, one of the remaining few AAA-rated countries. Confirm can repay you back the interest you have earned |
|
| Ownership | It is your money, whether in CPF or in the Bonds, the money is still yours |
|
| Risk Level | Low Risk, or No Risk By the Singapore Government, one of the remaining few AAA-rated countries. Confirm can repay you back the money you put/save/earn with them |
|
Conclusion:
If you want to save for the long-term, go with CPF. It pays a higher interest over the long-term and ensures that your itching hands will not be able to squander it away.
But if you are just looking for a place to save before spending it (say on your home down payment), then save with SSB, it is less risker and provides a good enough interest to ensure you do not lose too much to inflation!
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