Came across this SAYE on POSB website lately and I thought I found a gem to place my funds. It is only looking through the illustration, I found out that the effective interest rate is almost half of the so called 2% pa interest.
How this scheme works is that you open an account and credit your salary monthly for 2 years. Every mth, they will credit a base interest of 0.1% pa and a 2% pa interest on the cumulated amount.
The illustration shows that a person banks in every beginning of the month with S$100. After 24 months, his accumulated amount is S$2400. the base interest accumulated is $1.25 and the additional bonus (2% pa) is $50.06. Total interest over 2 yrs is 51.31.
Dividing 51.31 over $2400 gives you 2.1379% over 2 yrs. That equates to only 1.068% pa interest if you have placed the $2400 in a Fixed Deposit which yields a 1.5% pa. (2 yrs of 1.5% will yield $36 annually, 2 yrs will generate $72).
If the amount is too small for you to see the difference, we can easily magnify it ten 10 times. Depositing $24000 for 2 yrs will yield $720 after 2 yrs. If you credit $1000 dollars over 24 months, total yield will be $513.1.
You would argue that you don't have a lump sum. If that is the case, you might be better off placing the funds in Std Chart e-saver account which generates 1.25% pa.
Tell us what you think.