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All You Need to Know About Using Your SRS Funds to Buy Singapore Savings Bonds

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Managing finances, especially in a super-expensive city like Singapore, can be quite tricky. Think about it, you get your salary and before you know it, the money is gone! Thankfully, the Government recognises this, which is why they provide various ways to help us save more money.

One form of saving is for our retirement through our CPF funds while the other way they help us save is by providing us with tax reliefs. This way, we can save for our future by reducing how much tax we pay now! 

One such tax saving scheme is the Supplementary Retirement Scheme (SRS). SRS is a voluntary scheme which encourages individuals to save for their retirement. This additional savings is over and above your CPF savings.

Related: How Much to Save for Retirement + Steps to Figure out Your Needs

So, why would you voluntarily save for retirement in another scheme when you already have CPF? Because of the tax benefits it provides! You can save a maximum of S$15,300 each year! So, if you are a mid to high-income earner, SRS savings are a great way to reduce the amount you pay as tax.

Most people who have put money in this account seem to be happy with the tax benefits.

But here’s the thing – your SRS account earns only 0.05% interest per annum, which means that if you leave this amount uninvested, you are actually not saving as much as you possibly can for your retirement.

Suggested reading: 6 Smart Things We Can Do That Will Reduce Our Income Tax

How you can invest your SRS funds

The first step to put your SRS money to use is to know that you don’t have to invest only in the unit trusts or index funds that the bank tells you to. There are plenty of other options. Here are some of them:

  • Unit trusts
  • Index funds
  • Endowment plans
  • Blue chip shares
  • Singapore dollar fixed deposits
  • Singapore Savings Bonds (SSB)

This last option is the latest one available to Singaporeans. Read on to know all that you need to know about these!

Check out: Retirement: How to Get Your Pot of Gold at the End of the Rainbow

Investing in Singapore Savings Bonds

Until recently, you could invest up to S$100,000 in SSBs, but thanks to the Monetary Authority of Singapore, you can now invest up to S$200,000 starting 1st February 2019. This limit will include SSBs purchased using cash as well.

Also, from this date, you can use funds from your SRS to purchase Singapore Savings Bonds. Here’s what you need to keep in mind:

  • You can submit an application to invest in SSBs via your SRS operator (OCBC, UOB, DBS, or POSB). This application needs to be submitted online since you cannot apply for an SSB over the counter or in person if you plan to use your SRS funds.
  • The minimum transaction amount is S$500.
  • A transaction fee of S$2 will be deducted from your SRS account for each application.
  • You can apply each month from the first business day until the fourth last business day of the month from 7:00 a.m. to 9:00 p.m. (Monday to Saturday). However, remember that on the first business day, applications will be open from 6:00 p.m. to 9:00 p.m.
  • Your SSB will be allotted to you by MAS on the third last working day of the month and issued to you on the first working day of the next month.
  • The first interest you earn will be credited to your SRS account 6 months after the bond has been issued to you. Post this, you will earn interest every 6 months.

Related: How to Buy Your First Singapore Savings Bonds in 4 Easy Steps

If all of this is too much to keep track of, worry not! Come March 2019 and you will have access to the ‘My Savings Bond’ portal launched by the Monetary Authority of Singapore. You can access the portal here and use your SingPass to log in. This way you can keep track of your SSB investments.

Read: Smart Beta Investing: What Is It And Why It Matters?

Why should you use SRS to invest in SSBs?

  • Higher interest rate: As opposed to the 0.05% p.a. interest that you earn if you leave your SRS funds idle, investing it in SSBs will let you earn around 2.20% p.a. (for a bond worth S$500 and with a tenure of 10 years).
  • Guaranteed returns: Yes, you can invest your funds in blue-chip shares with the hope of earning a high rate of interest, but returns aren’t guaranteed. When you play the share market, you need to be ready for the ups and downs that come with it. In contrast, SSBs are a safe and relatively risk-free investment option. Since this amount is being put aside for your retirement, you may want to think about how much of the money you are willing to risk.
  • Save on tax: Like we mentioned earlier, you end up saving quite a bit on tax by putting money into your SRS account. Besides, investing only further increases how much you eventually have in your retirement nest egg.

Suggested reading: 5 Crucial Things to Look Out For in an Investment

Think of your SRS savings as a brand new phone. At first, when you get it, you are excited by how sleek it looks. So, you put it back into its packaging and let it lie. However, the phone ends up losing value as the years go by. Now, even though you can still use it, it isn’t the same. The same goes for the money in your SRS account. You owe it to yourself to invest the funds. If not, you are just letting quite a bit of money go idle!

In fact, according to a Straits Times report, in 2017, around 34% of SRS funds were lying idle. This is S$2.34 billion lying idle! Imagine all the possibilities!

So, if you have an SRS account, make sure you put that money to use and since you can now invest up to S$200,000 in Singapore Savings Bonds, go ahead and invest. You’ll thank yourself when you realise you can retire in comfort!

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