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RESPONDING to fresh competition, OCBC on Sunday raised its rates for the savings account linked to Singapore's Baby Bonus Scheme.
This comes as POSB and UOB officially enter the Child Development Account (CDA) market this month. The market is currently 90 per cent dominated by OCBC while the other 10 per cent is held by Standard Chartered. The latter will continue to manage its existing CDAs until the end of 2018.
CDA is a special savings account that earns a slightly higher interest rate, and has the government matching the amount saved for a child. This is meant to be an incentive to raise the low birth rate in Singapore.
OCBC's CDA customers will get an interest rate of 2 per cent per annum on the first S$36,000, the bank announced over the weekend. The rate will be 0.5 per cent per annum for balances above S$36,000.
Previously, OCBC offered 0.05 per cent per annum for the first S$20,000 and 0.8 per cent per annum for amounts beyond that.
POSB, which is back on the scheme after a hiatus, is offering an interest rate of 2 per cent annually for its CDA subject to specified terms, it announced last week. It said more than 12,000 parents have registered interest to open CDAs with POSB, which has historically been tied to children's savings programmes in Singapore.
The bank said that the annual interest rate of 2 per cent applies to a family's first and second child, but is capped at S$12,000. For the third or fourth child, the rate will apply up to S$24,000.
POSB said that it would offer the rate for the five years that the bank holds the CDA mandate. This contract is handed out by the government.
UOB is offering a promotional rate of 2 per cent per annum for CDA deposits that exceed S$20,000, it said on its website. This rate would lapse by the end of the year, after which the prevailing rate of 0.8 per cent will apply.
For balances up to S$20,000, UOB will offer 1.7 per cent per annum up until the end of this year. From 2016, the rate will revert to the prevailing annual rate of 0.5 per cent.
Both OCBC and POSB have also sweetened their offering with related perks. For example, both will offer deals off insurance premiums for coverage for children.
"It's not enough to just give a 2% interest rate to our CDA holders and expect parents to sign up with us," said Dennis Tan, head of Consumer Financial Services Singapore, OCBC, in a media statement.
"We have to provide meaningful benefits and tools to aid in the parental journey."
An earlier version said OCBC will pay 0.5 per cent per annum for balances above S$36,000. It should be 0.05 per cent. The story has been amended to reflect this error.