Financial security doesn’t come without proper planning and investments. Thankfully, you don’t need to be a financial guru to get started. One of the most common types of investment in Singapore is endowment plans. There are a variety of endowment plans, including short- and long-term plans.
An endowment plan is a combination of a life insurance policy and a savings plan. This hybrid plan gives a guaranteed sum assured at the end of the policy as well as coverage against death, terminal illness, and in other cases, total and permanent disability.
An endowment plan can also be defined by its policy term. With endowment plans, you are required to pay premiums throughout the lifespan of your plan. These premiums are typically a fixed amount and must be paid every month, quarter, 6 months, or year.
What Are Short-Term Endowment Plans?
A short-term endowment plan matures quickly between 3-6 years and is ideal for saving towards a specific goal that requires a lump sum payment. Think of it as a savings plan that will help you hit a target amount at a later date.
Short-term endowment plans are perfect for investors who are saving towards a life milestone, such as marriage or downpayment of a house. It is also a good choice for savvy consumers looking to earn higher guaranteed interest rates than fixed deposits or SSB.
What Are Mid/Long-Term Endowment Plans?
Long-term endowment plans, on the other hand, have longer commitment periods – from 5 to 25 years. Just like short-term endowment plans, the premium is paid throughout the policy term.
The interest rate determines how much you can expect at the end of the term. The return amount is still not guaranteed as the actual benefits will depend on the participating fund’s market conditions and future performance. It’s best to ask your financial adviser about your guaranteed capital return.
It is perfect for retirement planning or for your children’s education plan. The catch? Terminating it before its maturity could be costly as the surrender value, if any, could be zero or less than the capital paid.
Reasons Why Singaporeans Are Buying Endowment Plans
Although the main priority is to save, endowment plans also act as a life insurance policy. That said, some Singaporeans are investing in this plan if they want coverage against death, terminal illness, and permanent disability on top of getting a lump sum upon maturity.
Here are a few reasons why you may want to invest in this type of plan.
- Education Fund: You can get an endowment insurance plan so that it fully matures by the time your children want to pursue higher education and are in need of financial assistance.
- Retirement: Upon maturity, you will receive a lump sum of the sum assured and potential bonuses – if any. You can use it towards your retirement.
- Forced Savings: Endowment plans require you to pay monthly premiums. This means you need to allot a specific amount throughout the policy term to enjoy the maturity benefit. With an endowment plan, you can build your savings in a more organized and structured manner.
- Insurance: On top of these savings, you will also enjoy insurance coverage. Rest assured that all insurers in Singapore are supervised by the Monetary Authority of Singapore (MAS). Plus, a Policy Owners’ Protection Scheme helps protect you in the event of a failure of a life or general insurer – as long as the insurer is a PPF Scheme member.
- Investment: If you choose a participating endowment plan, you can enjoy bonuses upon maturity. It is a low-risk investment that can help diversify your portfolio. Find out on the best stocks to invest in Singapore.
Factors to Consider in Choosing the Best Short-term Endowment Plans
There are different cash benefits to getting short-term endowment plans. However, what is best for you will still depend on your situation. From the discussion above, we encourage you to consider the following:
- Your saving goals
- Commitment period
- The amount you are willing to pay
- Policy benefits and coverage
- Guaranteed returns of the plans
Best Short-term Endowment Plans (EP)
|Short-Term Endowment Plan||Minimum Premium||Policy Term||Returns|
|GREAT SP Series 2||S$10,000||1-5 years||106.53% (Guaranteed)|
|DBS SavvyEndowment 4||S$5,000||3 years||100% (Guaranteed)
Up to 1.391% p.a. or up to 104.232% of your single premium amount (Non-guaranteed)
|Manulife Goal 7||S$10,000
|3 years||Fixed yearly income of 1.39% (Guaranteed)|
|LIC Secure Growth 3||S$20,000
|3 years||Will depend on your premium (Guaranteed)
S$20,000-S$45,000: 1.12% p.a.
S$50,000-S$150,000: 1.22% p.a.
|LIC Wealth Plus 6||S$20,000
|5 years||Will depend on your premium (Guaranteed)
S$20,000-S$45,000: 1.2% p.a.
S$50,000-S$150,000: 1.25% p.a.
|NTUC Income Gro Capital Ease||S$5,000||2 years||1.82% p.a. (Guaranteed)|
1. GREAT SP Series 2
It is a limited short-term EP by Great Eastern, a member of OCBC Group.
Minimum premium: $10,000
Policy term: 1-5 years
Maturity benefit: With the guaranteed maturity benefit of 106.53%, you will receive your total guaranteed maturity benefit of $326.50, provided you hold on until the end of the 2-year policy term.
Tranche: The application is already closed.
2. DBS SavvyEndowment 4
It is a short-term EP issued by the DBS. Manulife underwrites the insurance policy of this plan.
Minimum premium: $5,000
Policy term: 3 years. It also has the benefit of basic death coverage of 101% of the premium.
Maturity benefit: The plan is a participating endowment plan. The returns are split into a small guaranteed component and a non-guaranteed portion that depends on fund performance. The capital is guaranteed at the end of the policy term.
For instance, if you bought a $10,000 premium at the end of the policy term, you could cash out anything from $10,283 (guaranteed) to $10,423.
Tranche: The current tranche is open. To buy a plan, you have to be a DBS/POSB customer to apply.
3. Manulife Goal 7
It is a short-term EP of Manulife.
Minimum premium: Single premium of $10,000. This may be paid via cash or SRS.
Policy term: 3 years. There is also a basic death benefit of 101% of the premium. The plan also allows the option to withdraw fixed yearly income or leave it to accumulate for more interest.
Maturity benefit: For the first 2 policy years, there is a fixed yearly income of 1.39% of the single premium payable at the end of each policy year. This adds up to a total of 2.78% over 2 years. In case you opted not to withdraw the said fixed yearly income until the policy maturity, you will earn a guaranteed 1.39% p.a. This can go up to 4.23% p.a.
The capital is guaranteed only at the end of the term. As an illustration, if you bought a $50,000 policy have not withdrawn any annual payment, you can expect to cash out anything from $51,421 (guaranteed) up to $52,116 at the end of three years.
Tranche: It is currently open.
4. LIC Secure Growth 2
Life Insurance Corporation of Singapore offers LIC Secure Growth 2. LIC is a relatively small player in the insurance industry of Singapore. LIC Secure Growth 2 is promising because of its additional benefits.
Its plan covers a first-year accidental death benefit for policyholders below age 70. If there is an accidental death, it allows an additional 10% of the premium on top of the death benefit’s 101.12%/101.22%.
Minimum premium: $20,000 single premium (up to $150,000). Payments have to be paid using a paycheque or cashier’s order. If your premium is more than $50,000, you will have higher returns.
Policy term: 3 years in total. Its death benefit is at 101.12% or 101.22%, depending on the premium size.
Maturity benefit: It will depend on the quantum of your premium. A single premium from $20,000 – $45,000 has a guaranteed simple interest rate of 1.12% p.a. . Single premiums from $50,000 – $150,000 has a guaranteed simple interest rate of 1.22% p.a.
Tranche: It is currently open for applications.
5. LIC Wealth Plus 6
This is another endowment plan offered by LIC. LIC Wealth Plus 6 has a slightly longer policy term, but it gives higher returns.
Minimum premium: a single premium of $20,000 (up to $200,000). Premiums are paid using cheque payment or cashier’s order only.
Policy term: 5 years. If there will be untimely death, the single premium shall be returned. A guaranteed addition of the simple interest rate of 1.20% p.a. or 1.25% p.a. (depending on the premium size) each year, starting from the policy’s commencement to the date of death. The plan provides for the same benefits for those under the age of 65 who were diagnosed with a total permanent disability.
Maturity benefit: It depends on the quantum of the premium. A single premium of $20,000 – $45,000 has a guaranteed simple interest rate of 1.2% p.a. . While single premiums from $200,000 – $150,000 has a guaranteed interest rate of 1.25% p.a..
Tranche: The plan is currently open for applications.
6. NTUC Income Gro Capital Ease
This is a single premium endowment plan with a short commitment period of just two years. This plan is non-participating, so the expected return will be limited to guaranteed returns. It is important to note that there are no non-guaranteed returns on top of the 1.85% p.a.
Minimum premium: $5,000. This premium may be paid via eNets or PayNow or through your Supplementary Retirement Scheme (SRS) funds. A minimum of $20,000 is required if you buy the plan through a financial advisor.
Policy term: 2 years. The plan also covers death or total permanent disability. If such an incident happens in the first year, the return will be 100% of the premium. If it happens in the second year, the payout is 105%.
Maturity benefit: 1.85% p.a. for the endowment plant, and together with the insurance coverage, the total return is 3.73%. For example, a $10,000 premium will produce a return of $10,373 at the end of the policy term.
Additionally, your capital is also guaranteed and covered by Singapore Deposit Insurance Corporation (SDIC).
Tranche: Online application has been closed, but you may still sign up for the NTUC Income Gro Capital Ease at physical Income branches on a first-come, first-served basis.
7. Etiqa Tiq 3-Year Endowment Plan
The plan is a single-premium, non-participating endowment plan with guaranteed acceptance. It only has a policy term of 3 years.
Minimum premium: $10,000 single premium. The premium may be paid via bank transfer or PayNow. It is not SRS-eligible.
Policy term: 3 years. The plan includes a death benefit of 101% of the single premium.
Maturity benefit: A guaranteed return of 1.8% p.a. For instance, a $10,000 premium will have a $10,643 at the end of the term.
However, make sure you can commit to the three-year policy period as there is no guarantee of your capital or the returns if you terminate the policy before maturity.
Tranche: It has been fully subscribed to.
How Do Endowment Plans Compare to Other Savings Products?
|Endowment Plans||High-Interest Savings Accounts||Fixed Deposits||Singapore Savings Bond|
|Type of product||Savings + life insurance||Savings||Savings||Bonds|
|Duration||Between 3 years to 25 years; Cashes out at maturity and insurance coverage ends||Flexible: Can be short- or long-term||The shortest fixed period is 1 month.||Up to 10 years|
|Returns||Payout consists of guaranteed plus non-guaranteed returns (if any)||Yields up to 4.5% p.a. depending on the savings account condition||You will earn a guaranteed interest for the money you deposited||Interest rates start low but increase every year until the 10th year.|
|Flexibility||Some endowment plans have no option to withdraw the cash early||You can withdraw all your money and close your savings account||You can withdraw the money before it reaches maturity, but you will receive no or less interest.||You can withdraw early before the 10 years are up|
High-interest savings accounts
There are bank savings accounts that earn interest on the money you keep in the bank. The yield may be as high as 45% p.a. depending on the savings account condition. There are also high-yield savings accounts with ‘level-up criteria’ such as crediting your salary, spending on one of the bank’s credit cards, start investing, taking up a loan, and more to earn higher interest rates.
The interest rate of savings accounts is unpredictable. Unlike endowment plans, the interest rate in savings accounts is not clearly stated from the start. There may be changes with short notice.
It is a form of investment where you earn a guaranteed interest for the money you deposit with the bank over a specified duration. The earned interest may be paid out at regular intervals, often quarterly or annually. Generally, you may withdraw your money from the fixed deposits even before the end of the tenure. The downside of this, however, is you will get less interest or no interest at all.
Singapore savings bond (SSB)
The Singapore Government Securities issue SSBs (SGS) issues SSB. The Singapore government backs the same. SSBs provide step-up interest earnings on your savings. The interest rate usually starts low, and it increases every year until the 10th year.
The key in SSB is the longer you hold onto it, the more interest you receive. The payment of interest is expected every six months and automatically credited into the bank account is linked to your CDP Securities account.
If you have income that may be put and sealed to a bank for a short period of time, then getting a short-term endowment plan is a good move. At the end of the policy term, you will earn guaranteed returns plus some bonuses – if any. On top of that, you will also enjoy insurance coverage throughout the policy term.
- Endowment plans provide a guaranteed sum assured at the end of the policy as well as coverage against death, terminal illness, and in other cases, total and permanent disability.
- A short-term endowment plan matures quickly between 3-6 years and is ideal for saving towards a specific goal that requires a lump sum payment.
- It is a low-risk investment product, suited for people who are looking for a no-frills, easy-to-invest savings plan.
- Get a short-term endowment plan if you need insurance coverage and are saving up for a life milestone, such as marriage or downpayment for a home.
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