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    May 12, 2015

    Eyeing new govt bonds? Investors must pay with cash for now

    INVESTORS interested in a new type of government bond to be issued this year can only use cash to buy the bond for now, but the Government may consider allowing the use of Central Provident Fund (CPF) savings for these bonds down the road, Senior Minister of State for Finance Josephine Teo said yesterday.

    It will also look at letting people use funds from their Supplementary Retirement Scheme (SRS) accounts to buy the Singapore Savings Bonds, she said in Parliament.

    Responding to MPs who had asked about allowing the use of CPF or SRS savings to buy the new bonds, Mrs Teo said it "makes sense to start the savings bonds with cash purchases, as it complements the CPF scheme".

    She added that there are ongoing reviews on providing CPF members with more investment options, and the Government will consider all these alternatives "in totality".

    The interest rates paid by the Singapore Savings Bonds will be higher than that of short-term fixed deposits, but lower than longer-term CPF monies, Mrs Teo added, responding to queries from MPs during the second reading of the Government Securities (Amendment) Bill.

    The Bill, which was passed in Parliament later yesterday, proposed an amendment to allow the Government to impose restrictions on such transfers and pledges in future security issues. This change will allow the Singapore Savings Bonds to be issued as non-tradable securities.

    These bonds will be launched in the second half of this year, as part of moves to make low-cost investment options more widely available to retail investors.

    A feature of the product is that a bondholder can get his money back in any month, with no penalty imposed. This means that investors do not have to decide upfront the duration of their investment.

    Individuals will be able to apply for and redeem Singapore Savings Bonds through DBS Bank/POSB, OCBC Bank or United Overseas Bank ATMs, or via DBS/POSB Internet banking channels, the Monetary Authority of Singapore said yesterday.

    Applications and redemption requests must be made in multiples of $500. The bonds will be issued monthly, likely starting in the second half of the year.

    Each individual can apply for up to $50,000 per issue and can hold up to $100,000 of Savings Bonds at any point in time.

    The Government will review these caps if there is a need to, after the programme has been in place for some time, Mrs Teo said.