11 May 2022
SOURCE: CPF Board

We all want to grow our money and make it work harder for us to achieve our goals. One of the common methods for us to do so would be through investing. However, investments typically come with risks, and these risks could be substantial.

That being said, there are safer options for risk-averse Singaporeans to grow their savings too. These options tend to be less volatile and provide a little more security.

Here are five low risk options you might want to explore to grow your savings and let your money work for you:

1. Fixed deposits

What they are: Also known as term deposits, fixed deposits require a set amount of cash over a set deposit period. In Singapore, this period varies between three months to three years (depending on the bank). Typically, the longer the period, the better the interest rate earned.

Estimated returns per annum: Depends on promotion, period and minimum deposit.

Benefits: Rates are slightly better than stashing your cash in a regular savings account, and it is guaranteed by the bank. They are also easy to understand and often provide low-risk and stable income.

Drawbacks: You may incur an early withdrawal fee or penalty if you withdraw your funds before the end of the deposit period. Returns also tend to be lower than other investments. In addition, banks can change their fixed deposit rates at any time without prior notice. This means that if fixed deposit rates continue to decline, your returns will be affected.

Also, you cannot top up your existing deposit with more cash. This means that you would have to open a separate fixed deposit account if you wish to add more money.

Ideal for: Those with a large amount of money lying around and want to enjoy peace of mind from guaranteed returns.

2.  Singapore Savings Bonds (SSB)  

What they are: To raise funds, companies and governments issue a type of loan known as bonds. In turn, investors “lend” money to the bond issuer for a specific duration and receive regular income from the interest. One example of a bond is the Singapore Savings Bonds (SSB) which are fully backed by the Singapore Government. The bond pays step-up interest annually up to the 10^th year.

Estimated returns per annum: 0.86% for year one to 2.37% in year 10 for the May 2022 tranche.

Benefits: Fully backed by the Government, SSB lets you earn regular interest and is a good way to diversify your investment portfolio. Staggering the maturity or interest payment date of several bonds will also allow you to receive regular monthly income from the interest earned.

SSB are also flexible as you can invest as little as $500, and you can redeem them any time without penalty. You can also use cash or your Supplementary Retirement Scheme (SRS) funds to invest.

Drawbacks: There is an investment limit of $200,000 per person, which means that individuals with larger sums to invest might have to seek for alternatives. The step-up interest structure also means that the returns would be lower at the start, and your effective returns would be based on the duration of your investment.

Ideal for: Risk-averse income investors 18 years and above who do not mind lower returns in favour of more liquidity.

3.  Topping up your CPF  

What it is: Get higher monthly payouts in retirement when you make a cash top-up or CPF transfer to your Special Account (SA) or Retirement Account (RA) (for those aged 55 and above).

Estimated returns per annum: Up to 5%* for those below age 55, and up to 6%* for those above age 55

*Terms and conditions apply.

Benefits:  A risk-free and reliable way to boost one’s retirement income and to get tax relief at the same time.  Top-ups/CPF transfers can also be made to your loved ones’ CPF accounts to help them build their retirement savings too. In fact, more Singaporeans have been making top-ups/CPF transfers to their loved ones in recent years.   

For cash top-ups, you can enjoy tax relief for up to $16,000 per year – up to $8,000 when you make cash top-ups for yourself, and another $8,000 when you make cash top-ups for your loved ones.

The savings put into these accounts are set aside for your retirement, to be used for the monthly payouts you will get under the CPF Lifelong Income For the Elderly (LIFE) scheme, from age 65, no matter how long you live.  

Drawbacks: Making top-ups/CPF transfers to your CPF SA or RA is irreversible.

Ideal for: Those who want a safe and steady way to grow their retirement savings and have sufficient liquidity to set aside a sum of money for a longer period.

4. Matched Retirement Savings Scheme (MRSS)

What it is: The Matched Retirement Savings Scheme aims to help senior Singaporeans who have yet to reach the current Basic Retirement Sum, save more for their retirement.  From 2021 to 2025, eligible CPF members will receive a matching grant for every dollar of cash top-ups, up to $600 per year.

Estimated returns per annum:  Up to 6%* per annum.

*Terms and conditions apply.

Benefits: Eligible Singaporeans will receive dollar for dollar matching for every cash top-up made to the RA. Anyone can make a top-up to the RA of eligible members, and those who make the cash top-up to themselves, or their loved ones may enjoy tax relief as well.  Top-ups will help to boost payouts in retirement too.

Drawback: Top-ups can only be made to your RA in cash, which may impact those who have less liquid assets.

Ideal for:  Individuals (or those with loved ones) aged 55 to 70 with RA savings less than the current Basic Retirement Sum, who earn no more than $4,000 a month and own no more than one property with an annual value of $13,000 or less. Eligibility will be assessed annually, and eligible members will be notified by CPF Board at the beginning of each year.

5.  Voluntary housing refund

What it is: Individuals can make a voluntary housing refund of the Ordinary Account (OA) savings that has been used for their property. The refunded CPF savings can be used for future retirement needs, and the amount is capped at the full principal amount withdrawn for the property, with accrued interest.

Estimated returns per annum: 2.5%

Benefits:  A reliable way to grow one’s retirement savings. You will be required to refund less and will get more cash proceeds when you sell your property.

You can also use your refunded CPF savings for the various CPF approved schemes if needed.

Drawbacks: Refunds can only be done with cash. This would depend if you have enough set aside to repay your housing loan.

Ideal for: Those who want a safe and steady way to grow their retirement savings, and are looking for other ways to grow one’s CPF savings other than making top-ups.

Have peace of mind while growing your savings

With the wide range of products available to grow our money today, there will be options that could potentially generate higher returns. Nonetheless, it is important to ensure that you have safer instruments in your portfolio to hedge against investment risks.

If you’re unsure where to start growing your savings, you can begin by making the most out of your CPF to meet your financial needs. With CPF savings forming a secure foundation for your retirement, you can enjoy greater peace of mind while building your retirement nest egg.

Information is accurate as of the date of publication.