POSB: Our Friendly Banker Next Door

POSB pride themselves as being neighbours first and bankers second. And it’s true. Because Singaporeans have always treated POSB better than even their real neighbours. Otherwise, why are all of us lending POSB our hard-earned cash for no interest at all?! (Sorry, but I am not willing to factor in that abysmal 0.05%.)

Furthermore, besides offering the lowest interests, their ATMs and bank branches are always packed with people. Yet most Singaporeans (including me) continue to have an account with them and queue patiently for the services.

Luckily for us, POSB has finally decided to reciprocate our kindness and faith towards them. In these recent few months, this banker next door has introduced two wonderful products catered specially for the man on the street: POSB HDB Loan and POSB Invest-Saver.

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POSB HDB Loan

When I told my friends/cousins/neighbours/dogs that I was going to take the HDB Concessionary loan (at 2.6%, 0.1% above the CPF OA rate) for my new BTO back in 2010, they were mocking me for being a risk-averse wussy. Apparently, there was nothing concessionary about that loan. With SIBOR rates hovering at 0.5%-0.7% then, banks were offering home loans at interest rates below 2%. I still remember going around warning everyone that interest rates would be rising sooner rather than later and it was risky to opt for those seductive floating loans. 3 years on, I am still not getting the last laugh. In fact, I have even followed those risk-loving fellas and gave up on the HDB loan a few months ago in April.

And no, it’s not because my risk appetite has increased significantly compared to three years ago. I am also not going back on my prediction. It’s just that our friendly neighbour launched this irresistible POSB HDB Loan. Besides allowing me to take advantage of the low SIBOR rates (0.4% currently), it also offers me the stability of a fixed rate by capping the interest rate at 2.5% for the first 10 years.

Unless you are carrying a large home loan and unlikely to be able to repay it within another 15 years, you should really consider refinancing to this POSB deal. Previously, we were paying $1,024 every month for the mortgage but now, it’s reduced to $910 (based on 1.38% + 3 month Sibor rate). That’s a significant saving of $110 a month! Even in the worst case scenario, I would still be saving $13 a month from the 0.1% differential.

Well, Dr Doom might well argue that I would be in deep shit if the effective interest rate rises significantly after those 10 years. However, since we are currently using less than half of our OA contributions to finance the mortgage, we should be able to amass a good sum for a lump sum repayment by then. It also helps that the monies remaining in the OA are growing at a faster rate of 2.5%!

Obviously, there’s no prepayment penalty after the 10 years and they also provide a cash rebate of $1,800 to offset the legal fees  when you sign up. Seriously, can you believe they even slotted in a $50 Takashimya voucher to the Mrs to sweeten the deal?! But that’s what neighbours are for, isn’t it? So if you’re still holding on to the HDB Concessionary Loan, you should really ponder over your awfully cautious strategy.

POSB Invest-Saver

You have just picked up a personal finance book for the first time in your life and also very luckily stumbled onto my blog. Being a smart person who knows something good when you see it, you pour through all my articles. You learn so much and after that you’re also dying to start building up your passive income and create your own 15 hour work week. Unfortunately, you’re stuck because you know next to nothing about investing.

The friendly banker next door understands the plight faced by the average Singaporean who is tired of being average. He tries to help you to start investing with the POSB Invest-Saver. With this tool, you can now get your first taste of blue chip stocks like Singtel, SGX and SPH from just $100 a month and at an extremely low sales charge of $1.

Basically, it’s a Regular Savings Plan (RSP) that allows you to invest in an STI ETF (google it if you don’t understand) via a GIRO arrangement on a monthly basis. Obviously, there’s no guarantee of capital like fixed deposits or some ILPs. But you’re really likely to yield a good return based on past historical data. Furthermore, with dollar cost averaging built in, this is a product Bogleheads would recommend. Passive investing at its simplest and most effective.

It’s similar to the Philip Capital Share Builders Plan that I am currently enrolled in. However, Philip Capital charges a minimal fee of $6. It’s alright since we consistently put in $600 a month. But if you’re starting out with a low capital and are only prepared to put in a hundred bucks or two, POSB Invest-Saver is here to transform you into a full-fledged investor. I have done the fee comparisons and if this product was available three years ago, Philip Capital would have lost a customer.

And the best thing is, you only need to be 18 instead of the usual 21 to open this account with POSB. This neighbour is really trying to help Singaporeans start investing early. Moreover, it’s really convenient to open this account. You can register online or at any of POSB’s ATMs. It’s really that simple.

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So pay a visit to the POSB website today to learn more about these great promotions from our friendly banker next door.

 

Additional Disclaimer: For your information, I am not writing this article because I am getting a 0.01% higher interest on my POSB savings account. We really think these are good initiatives introduced by a Singapore icon. Wife and I are getting our younger siblings to open the POSB Invest-Saver account by next week to take advantage of the promotional $0 sale charge for the first $500!

 

 

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    8 thoughts on “POSB: Our Friendly Banker Next Door

    1. jo

      any comparison with ocbc blue chip investment plan. They seems to have started a new launch promotion – only 0.3% of the proceed for the charges.

      1. My 15 HWW Post author

        Hi jo,

        I am not sure how the promotion works but I doubt the 0.3% promotion is forever? For the OCBC regular fees, it seems an exorbitant $5 per counter whereas the POSB is a straight 1%.

        Unless one intends to invest more than $500 a month, the POSB option should be more attractive in the long run.

        1. jo

          Hi HWW, thanks for your comments. Our ‘neighbourhood’ banks start promoting these regular saving plans. It’s a good initiative for common folk like us to start DCA investing. However, upon reading some of their terms and conditions, there seems to have clauses that’s not to the consumer advantages. Correct me if I’m wrong.
          OCBC plan – you’re right. the promotion is not forever, they might start changing the buying and selling charges. But I like the part they allow us to transfer to CDP.
          POSB plan – the current promotion have zero sales charges. However, they are allowed to change the sales charges without prior notice. what if one day they just decide to impose 20% charges. POSB just going to get a big cut of our locked in investment?

          1. My 15 HWW Post author

            Hi jo,

            I prefer to compare using the regular charges stated in these products and it seems POSB was introduced with the young investor in mind.

            I have to admit what you say is true but I think it’s also highly unlikely for them to charge sales fees higher than Philip Capital. Think these products were introduced to compete with them. Even for OCBC, it’s pretty worth it if u invest a substantial amount in one counter every month.

      1. My 15 HWW Post author

        Hi Ian,

        Yes, it’s 8 years now for those who signed up recently. I guess I was lucky enough to be in the earlier batch who were guaranteed for 10 years.

    2. alim

      i want to ask a qn regarding POSB Invest-Saver,

      is there a good timing to stop the transaction or its good to just invest tht amount set every month?
      after a certain duration(maybe years?) of paying can i just stop paying and let the money grow?

      …sorry for having lots of qns im a newbie here.

      1. My 15 HWW Post author

        Hi alim,

        Yes, it’s definitely possible to stop contributing after some years and let the money grow by itself. I am not sure if there’s a good timing to stop though but most believers in index investing (you can google to know what this term means in detail) would probably only stop when they are no longer in the accumulation phase.

        The best timing to start is probably now if you’re interested in contributing amounts like a few hundred dollars each month. But make sure you really don’t need to touch those monies for at least 5 years since the market can be really volatile short-term wise.