SDA for Individual Investors to be Phased-Out Before the Year Ends

To those who don't know, Special Deposit Accounts (SDA) is an investment option from Bangko Sentral ng Pilipinas (BSP) which aimed to mop excess liquidity in the Philippines. There was a time (I think 2009) when the interest rate was high ~4.5%. Imagine having a low-risk investment with a return of ~4%. This was very enticing to investors, it was certainly better than bank deposits, even time deposits, and was competitive to bond investments.

Now, BSP may want the money out of its system. There's a rumor that SDA will be phased out. Seems there's now too much money parked in SDA (P1.859 trillion as of May 3), and it's not beneficial for the economy anymore. It started with BSP cutting the rates down, from 4+%, down to 3.5%, when it didn't work, it further cut the rates down until it reached the rate we have today which is a mere 2% (gross).

Seems there's some truth to the rumor. New memorandum 2013-021 from BSP implicates that banks can no longer offer SDA to individual investors. SDA is now exclusive to funds in trust and UITFS are allowed to park.

The order also states that by end of July, 30% of current placements should be withdrawn from SDA and the rest should be removed by November 30, 2013.

So if you're an individual and you have placement in SDA, I would suggest that you already look for alternatives. In my earlier post, I recommended BPI Maxi Saver, but you are not limited to that. There's also Bond UITF's and Bond/Fixed-Income Mutual Funds (MF) that offers lower volatility and risk but have moderate returns.

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Source:
Philstar

BPI raises SDA minimum to 500K

In my previous post, I wrote about investing in SDA, and choosing BPI because it had the lowest minimum investment which was only P50,000. Now, BPI announced it is raising the minimum investment to P500,000 effective this December. And my investment is below that amount.

What will happen to enrolled accounts with less than 500K

I talked to a BPI representative, and she said that the amount will placed to the settlement account if the enrolled amount is less than the minimum. It will not be re-enrolled this December. My investment is due every 28th of the month; she said that it is eligible for one last iteration.

What's the next best thing to do

I'm not sure yet, whether to just to invest it in bond or place it somewhere else. Then it will be subject to a holding period, where there is a pre-termination fee should you decide to withdraw it earlier than the required period.

[Update 1/13/2013] BPI Maxi Saver may be the next best thing, which shares similar features with SDA. It is liquid, in fact there's no lock-up period and low risk which is ideal for emergency funds. 1.25% interest + 1% bonus if you don't withdraw any money.

Is Special Deposit Account of BSP safe?

Last week I put some of my money in Bangko Sentral ng Pilipinas' Special Deposit Account (BSP SDA) through BPI. SDA started in 1998. It's a product of BSP aimed to mop excess liquidity in the financial system which is said to be bad for the economy (I haven't dug that deep yet). It offers higher interest rate compared to other low risk investments like time deposit.

The rates now are lower compared to previous years, it seems that BSP is starting to control the in flow of money to this product. Even with the lowered interest rates, it's still much better than any bank's time deposit (TD) and, of course, way better than just putting your unused money in a savings account.