Deposit products to interest the saversFor the latest auction result, the average yield of the SGS 3 months and 1 year Treasury Bill were at 0.24% and 0.42%. As such, the rates of the fixed deposits offered by the banks above are quite attractive.
By Francis Chan, Companies Correspondent
The Straits Times, 25 Aug, 2010, Wednesday
BANK depositors are being warned that measly interest rates on savings are not likely to rise this year.
But they can take some comfort from innovative new deposit products at some banks that offer higher rates as a way to lure savers.
Besides offering promotional rates from time to time, more banks are rolling out special savings programmes with slightly higher returns to cater to different customer needs and demographics.
For instance, to celebrate its 75th anniversary, United Overseas Bank is offering to pay interest of 0.75 per cent a year for fresh deposits starting from $10,000.
That may still sound like a fairly modest return, but it compares favourably with basic savings accounts that typically pay as low as 0.1 per cent a year in interest.
Some of these new deposit products return as much as 1.3 per cent a year for two-year fixed deposits, while others come with a monthly savings plan or even free insurance coverage.
Interest rates for garden variety savings accounts have not risen above 1 per cent a year since August 2001, when banks were paying, on average, 1.28 per cent.
Monthly average savings rates have also been on a downward trend since 2006, falling from 0.26 per cent.
Based on latest figures compiled by the Monetary Authority of Singapore from 10 financial institutions, savings accounts earned an average of 0.16 per cent a year in January, before slipping to a dismal 0.14 per cent from February to last month.
Savers hoping for a higher yield from their hard-earned cash will have to look elsewhere as interest rates for run-of-the-mill savings accounts are unlikely to rise at least within the year, say industry experts and observers.
‘Banks here – especially the local institutions – are very well-capitalised, so they have little incentive to offer high returns when taking deposits from savers,’ said a former independent financial adviser-turned-private banker.
He added: ‘This is unless they have a sudden need to raise capital for a particularly large financing deal they are hoping to close.’
Despite the meagre interest rates from savings accounts, experts like Mr Brian Goh of iPac Financial Planning still see them as an important tool for any investor or saver, especially when coping with rising inflation.
‘When you take it out of the bank, it will be eaten up by inflation, which is going to rise by between 3 and 5 per cent,’ said Mr Goh, a senior vice-president at iPac.
‘We need to remember that capital preservation and the ability to handle loss of capital, especially if it is a permanent loss, is just as important as growing your wealth.’
A survey by The Straits Times has found that Malaysian lender CIMB Bank has one of the highest interest rates on offer in Singapore.
According to the bank’s website, its latest promotion offers a rate of 1.3 per cent a year for a 24-month fixed deposit, but customers will need to put in a minimum of $10,000 and maintain that amount over the next two years.
At Maybank, customers can enjoy a rate of 0.75 per cent if they deposit a minimum of $10,000 for one year.
And to cater to customers above 50 years of age, Maybank’s Privilege Plus Savings Account offers a rate between 0.4375 per cent and 0.5 per cent a year, with a bonus of free personal accident insurance coverage for eligible customers.
Local lender OCBC Bank pays 0.688 per cent for a nine-month time deposit or 0.788 per cent for a 14-month term.
Another offering from the bank is OCBC MSA 123, a monthly savings account that comes with terms of 13 months, 24 months or 36 months.
They offer rates of between 0.6 per cent and 1 per cent a year. Customers start earning interest by making monthly contributions of $50 to $5,000.
Head of deposit at OCBC Bank, Ms Chng Bee Leng, said such promotions can still help customers maximise their returns while staying liquid in a low interest rate environment.
Wednesday, August 25
Deposit products to interest the savers
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Wednesday, August 25, 2010
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