We have been living in a low interest rate environment since the Global Financial Crisis (GFC) of 2007-2008. Interest rates on our savings accounts are close to zero and fixed deposit rates have generally yielded less than 2% for over a decade.

This may have encouraged some, especially the more risk averse, to fund their regular and special CPF savings accounts to take advantage of the higher rates of 2.5% and 4%, respectively. Naturally, supplementing your CPF seemed like a good financial decision as there were few comparable investment products that could deliver the respective CPF returns or more at equally low risk.

However, that rhetoric changed this year as ten-year average interest rates on Singapore Savings Bonds (SSBs) began to climb above the 2.5% mark in line with the overall rise in interest rates around the world. In the last September issue of the SSB (SBSEP22 GX22090Z), the first-year and ten-year interest rates are 2.63% and 2.80%, respectively.

At first glance, investing in SSB may seem more attractive than topping up your CPF accounts due to the higher interest yields. However, is there more to it than meets the eye? We will discuss some of the pros and cons of investing in SSB and supplementing your CPF based on the following five factors.

#1 Fund Use Cases


The Singapore Savings Bond (SSB) is intended to encourage long-term investment. It cannot be bought or sold on the open market, traded on SGX or pledged as collateral. Therefore, there is only one use case for investing in SSB, which would be to collect coupon payments.

Read also : [2022 Edition] Complete Guide to Buying Singapore Savings Bonds (SSB)


On the other hand, there are three ways to invest in your CPF accounts by doing a cash top-up. Each account has a specific purpose.

i – Retirement Sum Topping-Up Scheme (RSTU)

Under the Retirement Sum Topping-Up (RSTU) program, you top up cash either to your Special Account (SA) if you are under 55 or to your Retirement Account (RA) if you are 55 and more to earn 4% interest on your funds.

The money in this account is for your retirement needs and will be used to pay the premium for your CPF LIFE plan. You can also invest in approved investment products under the CPF Investment Program (CPFIS) after setting aside $40,000.

ii – Voluntary Housing Reimbursement

You can top up your Ordinary Account (OA) through the Voluntary Housing Reimbursement Program if you used your CPF funds to finance your residential property purchase to earn 2.5% interest.

The money in this account is for your retirement needs, but it can also be used for other short-term expenses like housing. You can also invest in CPFIS-approved products using your OA savings after setting aside $20,000.

iii – Medisave account top-up

The last account you can cover is your Medisave (MA) account, which also earns 4% interest. The money in this account is intended to help you pay for your health expenses such as outpatient treatment, hospitalization, long-term care and insurance premiums.

Summary: Based on permitted use cases for funds, there is more flexibility with CPF accounts than with SSB, which can only be used to collect coupon payments for the full term of the loan. So that while we can top up our CPF accounts to earn the higher interest offered to keep our funds intact, we can always choose to use the CPF funds for other purposes permitted by each of the three accounts. This makes CPF refills more attractive than SSB.

#2 Interest Rate Calculation: Simple Vs Compound


Interest rates on SSB are fixed and locked in at the time of issuance. Simple interest rates are determined based on the average SGS returns of the previous month and will “rise” each year, earning you a higher coupon (average interest rate) on your original investment the longer you hold.

Read also : How is the interest rate calculated for Singapore Savings Bonds (SSB) and why is it increasing?


As with CPF accounts, the interest rate calculation varies between OA and SA/MA accounts.

The interest rate of the OA account is calculated on the basis of the average over 3 months of the interest rates of the main local banks, subject to the legal minimum interest of 2.5% per annum.

As with SA/MA accounts, the interest rate is calculated on the basis of the 12-month average yield of 10-year SGS plus 1%, subject to the legal minimum interest rate of 4% per annum.

However, unlike SSB, CPF interest is calculated monthly and compounded annually.

Read also : What would it take for CPF interest rates to rise beyond 2.5% (for OA) and 4.0% (for SA and MA)

Summary: A simple calculation of interest like the one used for the SSB is favorable to the borrowers. However, as investors, we are better off with an investment that gives compound interest like CPF. Compound interest will allow us to grow our wealth more exponentially over time than simple interest because the interest we earn each year is added to the principal, causing our balance to grow at an increasing rate. Therefore, a CPF refill is the best choice based on this criterion.

#3 Time needed to cash out


You can enjoy SSB cash returns every 6 months (or twice a year) from issuance. In addition, the SSB can be redeemed either when the bond matures after 10 years or in a given month.

Although there is no penalty for early redemption, which must be in multiples of $500, a transaction fee of $2 will be incurred for the early redemption request. However, you may receive the principal amount and accrued interest on the redemption amount no later than the second business day of the following month.


CPF members who reach their Full Retirement Sum (FRS) at age 55 can withdraw any higher amount at any time. Otherwise, if you haven’t reached the FRS, you can only withdraw up to $5,000, depending on your year of birth.

In addition, CPF members born in 1958 and later can opt out up to 20% of their AR savings (less the $5,000 withdrawal) from age 65, while CPF members born in 1957 can withdraw up to 10% of their RA savings.

Summary: If we judge by the liquidity of the investment or the speed with which we can collect our money, then the SSB comes out on top. Investors would not only be able to enjoy immediate returns on the SSB investment, but they could also redeem the investment quickly and without any financial loss before the full term of the loan. With respect to CPF investments, a portion of our funds will be retained as part of the FRS and only any amount above this amount can be withdrawn after age 55. Accordingly, investments in CPF could be highly illiquid.

#4 Tax relief


Although there is no tax relief for investing in SSB, coupon returns are tax exempt.


Starting January 1, 2022, you can get tax relief of up to $8,000 per calendar year for CPF supplements for your SA/RA under the RSTU and your MA. Plus, you can get another $8,000 in tax relief when you complete the SA/RA and/or MA of your loved ones.

Summary: Although the total return of the SSB investment is tax exempt, you would not be eligible to receive tax relief on this. On the other hand, if you top up your CPF accounts and have not reached your Total Retirement Sum (FRS) and Basic Health Care Sum (BHS) limits, you may qualify for relief. tax of $8,000 per calendar year. Thus, from a tax point of view, it is more interesting to top up one’s CPF accounts than to invest in the SSB.

#5 Protection of investments against creditor claims


No protection is afforded to SSB’s investments against creditors in the event of bankruptcy proceedings.


Since CPF funds are intended for members’ basic retirement needs, the funds are protected under the CPF Act from claims by creditors. This is done to prevent members’ retirement savings from running out due to bad debts.

Summary: Although bankruptcy is unlikely for most of us, it is comforting to know that your CPF money is safe and protected from creditor claims. This is another benefit to supplementing your CPF rather than investing in SSB.

Also Read: What Happens To Your CPF Funds If You File For Bankruptcy

What is the best investment? SSB or CPF

A quick summary based on the above factors.

Fund Use Cases One-time use to collect coupon payments Multiple uses. Can be used to earn interest on intact funds, invest excess amount, or be used for housing or medical expenses.
Calculation of interest rates simple interest Compound interest
Time required to cash out Can receive cash coupon payments every 6 months and redeem the funds on the second business day of the following month FRS deductible according to age group at 55 and up to 20% of RA savings for CPF members born in 1958 and after
Tax relief No but returns are tax exempt Yes, but limited to $8,000 for automatic top-ups and an additional $8,000 for loved ones top-ups
Protection against creditor claims Nope Yes

SSB and CPF meet different investment needs of investors.

An investor who wants full flexibility with his money without too much risk will find the SSB a suitable investment to park his cash reserve. Additionally, investors looking for passive investments to supplement their cash flow needs may also find the SSB suitable as coupon payments are made in cash every 6 months.

Conversely, an investor with a longer investment horizon may instead want to top up their CPF accounts to take advantage of the compound interest and annual tax relief they may receive. At the end of the day, it must be understood that the CPF savings are intended for his retirement needs and the purchase of the CPF LIFE plan. So, as we can only withdraw amounts that exceed the FRS, we may not be able to withdraw any amount of money that we top up.

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