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SRS Investment Options: A Comparison Which You Can Consider

If you have a Supplementary Retirement Scheme (SRS) account which you’re contributing regularly, you should consider investing it. When uninvested, SRS funds will only earn a very low interest rate of 0.05% p.a., not even beating the inflation rate! This means that your uninvested SRS funds will be worth less in future when the cost of goods increase.

Investing your SRS funds is a wise strategy to enjoy tax benefits, while growing your retirement funds steadily. Returns from investing your SRS funds are also tax-free.

Let’s look at this example of Ben, Eunice, Tom and Celine’s SRS fund projection, with a single contribution of $100,000: 

In fact, Ben could consider investing in a longer term single premium endowment plan for a potentially higher return. For example, after 40 years, the accumulated wealth may grow to $434,645* with an estimated annual rate of return of 3.74%*. 

*Estimated returns/benefits for the above single premium endowment plan include both guaranteed and non-guaranteed returns/benefits based on 4.25% p.a. illustrated investment rate of return of the Life Participating Fund.

**Estimated return for SSB is the average return p.a. for 10-year SSB bond issued in Oct 2021. Citibank board rate for a 12-month tenure in October 2021.


#Assumed that FD maturity payment after 12-month tenure is reinvested at the same board rate for subsequent 12 months over a 10-year period.

So here’s what you can invest with your SRS funds: 

1. Fixed Deposits

If you want a guaranteed, safe return, you can consider fixed deposits. Most banks have fixed deposits that guarantee interest based on the term you would like to deposit for. 

With fixed deposits, you can safely deposit a fixed amount of money, over a fixed period of time, for a fixed amount of guaranteed interest, without any risk of losing the money. In the event you need the money urgently, you can also withdraw the money anytime, without losing your principal, although there might be some early withdrawal charges involved. However, it is best to have a long-term mindset when you invest your SRS funds, because you cannot withdraw early without incurring the 5% penalty, which is higher than your fixed deposit’s return.

Of course, the rate of returns is proportional to the risk- the lower the risks, the lower the returns. Fixed deposits typically offer only 0.05% p.a. to around 0.5% p.a. returns for new placements during this current low interest rate environment. The higher end of this range is usually available for a limited promotion period only.

2. Singapore Savings Bonds (SSB)

SSB is one of the most popular options for Singaporeans to invest in, as it usually offers a more attractive return, compared to fixed deposits. SSB is part of the Singapore Government Securities (SGS). When you purchase SSB, you will receive interest payments every 6 months, which will be credited to your SRS account. 

The interest rate increases the longer you hold the SSB. However, you can only hold SSB for a maximum of 10 years. If, at any point you would like to withdraw your money, you can do so safely without losing your capital.

While SSB guarantees interest, it is also interesting to note that investing in SSB at different times may guarantee different interest rates. For example, if you purchase SSB in January 2021, your rate of returns upon maturity (10 years) is 0.90% p.a., as opposed to 1.39% p.a. if you purchase it in October 2021. So, while SSB is one of the safer ways to invest for risk-averse investors, it is not one of the most ideal.

January 2021

Interest Rates
Year from issue date 1 2 3 4 5 6 7 8 9 10
Interest % 0.27% 0.27% 0.43% 0.69% 0.87% 0.98% 1.14% 1.31% 1.48% 1.64%
Average p.a. return %* 0.27% 0.27% 0.32% 0.41% 0.50% 0.58% 0.66% 0.74% 0.82% 0.90%
*At the end of each year, on a compounded basis.

V.S. October 2021

Interest Rates
Year from issue date 1 2 3 4 5 6 7 8 9 10
Interest % 0.35 0.35 0.37 1.13 1.42 1.58 1.80 2.03 2.27 2.55
Average p.a. return %* 0.35 0.36 0.48 0.64 0.79 0.92 1.04 1.16 1.27 1.39
*At the end of each year, on a compounded basis.


3. Endowment Insurance Plans

Endowment insurance plans are another extremely popular option among savvy SRS fund investors, because they offer relatively high returns, with low risks, as they are usually capital guaranteed by Singapore Deposit Insurance Corporation (SDIC), under the Policy Owners’ Protection Scheme.

Endowment plans are investment plans that offer guaranteed and non-guaranteed interests, usually totalling to approximately 3-4% p.a., much higher than fixed deposits and SSB. Other than higher return rates, endowment plans also come with life insurance. Some endowment plans, such as MyLifeIncome III, also provide yearly cash dividends after a certain accumulation period.

Endowment plans are uniquely designed to help investors maximise their investments, while avoiding unnecessary risks. Short-term endowment tranches are commonly both capital- and interest-guaranteed. Mid to long-term endowment plans offer a longer investment horizon to grow your savings. They include both guaranteed benefits and annual bonuses or cash dividends that depend on the performance of the insurer’s participating funds. These annual bonuses or cash dividends are non-guaranteed, but will become guaranteed additions to the death and maturity benefits, once they are announced during the policy term. As you grow closer to your retirement age, endowment plans offer the most attractive returns, among other safer investments.

If there is an emergency and you need to withdraw your funds, you can withdraw anytime, but like fixed deposits and SSB, there might be charges for early withdrawal. 

Interested to invest your SRS funds? Click here or contact us to know more about SRS-approved endowment plans.

Moving forward, these SRS-approved investment options have high market volatility. In other words, the next few investments may cause you to lose your capital. If you are uncomfortable with this, the options mentioned above would be more suitable for your risk appetite.

4. Blue Chip Shares

Blue Chip shares are typically equities of well-established and financially sound organisations that have been operating for many years. You can use your SRS funds to purchase securities on the Singapore Stock Exchange (except American Depository Receipts). 

You should always remember that just because a stock is “blue chip”, it is not infallible. Stocks can potentially give you higher returns compared to the above options, but there are much greater risks involved. Besides market fluctuations, your retirement fund will depend entirely on the stocks that you purchased. 

If you know what you are doing, that’s great. If not, are you mentally and financially ready to stake your retirement funds on stocks? 

5. Unit Trusts

If you want to invest in stocks, but also want lower risks, you can consider investing in unit trusts. Unit trusts are like a diversified basket of multiple stocks, actively managed by a fund manager, in return for a fee. 

Fund managers are professional individuals who rely heavily on research to pick stocks that they believe have strong potential to grow, or sell stocks at the right timing to earn. Good fund managers with expertise and experience aim to beat the market, with higher than average returns.

That is why it is crucial to pick a good fund with experienced and competent fund managers, who can help diversify your risks, while maximising your returns. 

At InvestDIY, our Star Rating System takes the guesswork out of investing. All our funds are designed to diversify your portfolio, while providing growth opportunities, and are professionally managed by Black Rock, J.P. Morgan, PIMCO and other top global fund managers. Depending on your investment goals and risk profile, you can invest in investment grade securities or thematic funds. The Balanced portfolio produced a return of 15.34% p.a. in the past 3 years.1 

Interested to invest your SRS funds in unit trusts? Click here or contact us to learn more about how you can maximise your SRS returns with unit trusts.

6. Index Funds and Exchange Traded Funds (ETFs)

Index Funds and ETFs are relatively similar to unit trust – they are a basket of different equities, such as precious metals, but are passively managed. These funds usually have a theme, such as equities, bonds, equities and bonds, commodities, precious metals or originating from a specific country. 

Index funds are also commonly tagged to a benchmark, such as the Straits Times Index (STI), which is the benchmark index of the Singapore stock market.

7. Real Estate Investment Trusts (REITs)

REITs are companies that own and usually operate real estate, producing income. Real estate owned by REITs can range from office buildings, hospitals, residential areas, hotels and shopping centres. In Singapore, where land is one of the most precious resources, REIT sounds like a great investment, right?

Again, that depends. This is because of the decline in rental yields in recent years, because of Covid-19 and the rise of eCommerce.

Regardless of what you choose to invest your SRS funds in, it is most important to invest based on thorough research and your risk appetite. Investing correctly can maximise your SRS fund’s returns, but a wrong decision might make a huge dent in your retirement funds, setting you back from your ideal retirement. 

If you are still unsure how you can best utilise your SRS funds to make it work for you, feel free to contact us or Whatsapp us at +65 9151 5963 (Mon to Fri: 9am – 5pm).

This is for general information only and does not constitute financial advice. This advertisement has not been reviewed by the Monetary Authority of Singapore.

1 All return figures and other statistics shown above are for illustrative purposes only as past performance are not indicative of future performance or results. Actual returns will vary greatly and depend on various factors and involves risk. It is important to note that the capital value of investments and the income from them may go down as well as up and may become valueless. Some of the statements contained in this website may be considered forward-looking statements which provide current expectations or forecasts of future events. There is no assurance that the conditions described in this website will remain in the future and actual results may differ materially.

Posted in Investments, Retirement

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