A plate of chicken rice costs $3.50 today, when 10 years ago, it was $2.50.
Things are getting more and more expensive, and with the upcoming increase in GST to 9%, we need all the help we can get where our money is concerned.
Are you making your money work harder for you, or are you working harder for your money?
This might be where an endowment plan might be of interest to you.
With an endowment, you set aside a sum of money with an insurer for them to invest for a period of time, with the expectation of getting back your capital with additional returns at the end of the plan.
There are many different endowment plans which serve a wide range of needs.
For simplicity’s sake, this article’s focus is on endowments, also known as savings plans.
Here’s our take on what to consider when selecting an insurance savings plan and the best endowments based on different criteria.
Comparison of the Best Endowment Plans in Singapore
Insurer | Plan Name | Policy Term (Years) | Premium Term (Years) | Protection Coverage | Cash Payout Option? | Cash Payout Frequency | Withdraw without penalty? | Interest Rate Marketed* | Other Notable Features | Riders available |
NTUC Income | Gro Cash Flex | 10, 15, 20, 25, 30, or till age 120 (options dependent on premium term) | 5, 10, 15, 20, 25, 30 | 105% of all net premium(s) and a terminal bonus | Yes; 3% of your sum assured and a non-guaranteed cash bonus | Annual, Monthly | No | up to 3.25% p.a. | – Premiums waived upon disability and a lump sum benefit of 2 years of annual premium will be paid – Premium waiver for 6 months if retrenched – Guaranteed insurability option at selected life events | Cancer Premium Waiver Rider |
Gro Saver Flex | 10, 15, 20, 25, 30 years or till age 120 | SP, 5, 10, 15, 20, 25, 30 | 105% of all net premium(s) paid or 101% of the cash value, whichever is higher | No | – | No | – | |||
Gro Power Saver | 10 | 3 | higher of: (i) 105% of all net premiums paid and 100% of bonuses, or (ii) cash value | No | – | No | up to 2.96% | – Premiums waived upon disability and a lump sum benefit of 2 years of annual premium will be paid | ||
Gro Sure Saver | 15 to 25 | 15 to 25 | (Death, TI & TPD) Sum assured and bonuses | Yes; Guaranteed yearly cash benefit equal to 5% of your sum assured | Annual | No | up to 3.25% p.a. | – | – Hospital Cash Rider – Premium Waiver Riders (Death, TPD, CI) – Additional SA for death, disability, or CI | |
Luxe Solitaire | Till age 120 | SP | higher of: (i) 105% of net single premium and a non-guaranteed terminal bonus, less all monthly cash benefits and cash bonuses paid or (ii) cash value | Yes; Guaranteed monthly cash benefit is 0.104% of the net single premium, while non-guaranteed monthly cash bonus is up to 0.20% of net single premium | Monthly | No | up to 3.25% p.a. | – Maturity benefit at the point of policy maturity when the original insured reaches 120 years old – Minimum SP of $100,000 | Not indicated | |
AIA | AIA Smart Wealth Builder Series | up to age 125 | SP, 5 and 10, 15 or 20 | higher of (i) 105% of total premiums paid or (ii) 101% of the guaranteed cash value and any bonuses not surrendered | No | – | Yes | – | – Perpetual plan (no maturity) but able to do withdrawals after certain number of years – Capital guaranteed after a number of years (based on premium term) | – ECI/CI Premium Waiver Rider – ECI Payor Benefit Rider |
AIA Smart Flexi Rewards (II) | 15 to 30 years | 5 | (Death Benefit only) (i) higher of (1) 101% of the total premiums paid (less coupons paid out), or (2) guaranteed cash value, and (ii) any bonuses or coupons which you have not surrendered | Yes; 5-yr premium term = 15% of insured amount from end of y2, 10-yr premium term = 30% of insured amount from end of y4, regular premium term = 40% of insured amount from end of y4 | Annual | No | – | – Maturity payout – Capital guaranteed at maturity (5- & 10-year pay only) | – ECI/CI Premium Waiver Rider – ECI Payor Benefit Rider | |
20 to 30 | 10 | |||||||||
15 to 30 | 15 to 30 | |||||||||
AIA Smart Flexi Growth | 15 to 30 years | 5 | (Death Benefit only) (i) higher of (1) 101% of the total premiums paid (less coupons paid out), or (2) guaranteed cash value, and (ii) any bonuses or coupons which you have not surrendered | No | – | No | – | – Capital guaranteed at maturity for 5- and 10-year pay plan | – ECI/CI Premium Waiver Rider – ECI Payor Benefit Rider | |
20 to 30 | 10 | |||||||||
15 to 30 | 15 to 30 | |||||||||
Prudential | PRUActive Saver III | 10 to 30 | SP, 5 to 30 | higher of: (i) 105% of the total premiums paid up to time of death; or (ii) 101% of the surrender value, | No | – | No | – | – Maturity benefit – Capital guaranteed at maturity | – CI/ECI Premium Waiver Rider – Payor Benefit Rider |
PRUWealth III | till age 110 | SP, 5, 10, 15, 20 | higher of: (i) 105% of the total premiums paid up to time of death; or (ii) 101% of the surrender value, | No | – | Yes | – | – Perpetual plan (no maturity) but able to do withdrawals after certain number of years – Capital guaranteed after a number of years (based on premium term) – Premium waiver for 1 year upon death of loved one – Defer premiums for up to 2 years if policy has sufficient value | – CI/ECI Premium Waiver Rider – Payor Benefit Rider | |
PRUActive Cash | 15 to 25 | 5, 10, 15, 20 or 25 | (Death) higher of: (i) 105% of the total premiums paid up to time of death; or (ii) 101% of the surrender value, | Yes; guaranteed yearly cash benefit payouts which is 3% of policy’s face value | Annual | No | – | – | – CI/ECI Premium Waiver Rider – Payor Benefit Rider | |
PRULifetime Income Plus | Whole Life | SP | higher of: (i) 101% of single premium; or (ii) 101% of the surrender value as at the time of death, plus any cash benefit | Yes; monthly cash benefit from the 36th policy month onwards | Monthly | No | – | – Monthly payouts for life | Not indicated | |
Singlife with Aviva | MyChoiceSaver | 10 to 25 years or up to age 99 | 5, 10, 12, 15, 18, 20 or 25 | higher of: (i) 105% of the Total Premiums Paid for the basic plan; or (ii) the Guaranteed Cash Surrender Value; plus any reversionary and terminal bonus | No | – | No | – | – Capital guaranteed – Maturity benefit – Additional payout for accidental death (100% of Sum Assured on the basic plan) – 12 months waiver of interest in the event of unemployment or retrenchment | – Death, disability and TPD rider which pays out 10x of annual premium – CI Premium Waiver Rider – Payor Benefit Rider |
MyEasySaver II | Same as premium term | 12, 15, 18 or 25 | higher of: (i) 101% of the Total Premiums Paid for the basic plan; or (ii) the Guaranteed Cash Surrender Value; plus any reversionary and terminal bonus | Yes; yearly guaranteed cash payouts from the end of the 2nd policy year (5% of your sum assured) | Annual | No | 2.83% | – Maturity benefit is 160% of your sum assured, less all the payouts given – Additional payout for accidental death (100% of Sum Assured on the basic plan) | – Death, disability and TPD rider which pays out 10x of annual premium – Cancer Premium Waiver Rider – Payor Benefit Rider | |
MyLifeIncome III | Whole Life | 3, 5, 10, 15, 20 or 25 | higher of: (i) 101% of the Total Premiums Paid for the basic plan; or (ii) the Guaranteed Cash Surrender Value; plus any reversionary and terminal bonus | Yes; yearly income of up to 5.6% of SA = Guaranteed Cash Benefit (1.2% of SA) plus Cash Bonus (up to 4.4% of SA) Accumulation period (number of years before payouts start once policy ends): 0 to 20 years, available options depend on premium term | Annual | Yes, for reinvested yearly payouts and booster bonus | – | – Booster Bonus that is 0.35% of Sum Assured, will increase your yearly payouts starting from your 21st income payout or when you turn 60 – Capital guaranteed after certain number of years (depends on selected policy term) | – Death, disability and TPD rider which pays out 10x of annual premium – Cancer Premium Waiver Rider – Payor Benefit Rider | |
AXA | SavvySaver II | 15, 18, 21 or 24 | Same as policy term | (Death & TI) Higher of: (i)101% of the total premium paid on the basic plan; or (ii) total surrender value; plus accumulated cash payouts | Yes; annual guaranteed payout at end of 2nd year, up to 5.50% of SA | Annual | Yes, able to withdraw accumulated cash payouts if required | – | – | – CI/TPD Rider – Payor Benefit Rider (death, TPD, CI) |
Great Eastern | GREAT Flexi Goal | 15, 20 | 15, 20 | (Death, TI and Disability) higher of: (i) 105% of total premiums paid; or (ii) guaranteed surrender value | No | – | No | up to 3% | – Capital guaranteed at maturity for limited pay plans | Not indicated |
GREAT Wealth Multiplier II | up to age 120 | 5, 10, 15 | (Death, TI and Disability) (a) 110% of the total premium paid; or (b) the guaranteed surrender value | No | – | Yes | – | – Multiplied returns of up to 7X – Capital guaranteed after a certain number of years based on premium term | – Selected premium waiver riders with retrenchment benefits | |
GREAT Lifetime Payout 2 | Whole Life | 3 | (Death & TI) Lump sum benefit of 105% of the total annual premiums paid plus any bonuses | Yes; payouts from the 4th policy anniversary with guaranteed payout (up to 0.85% pa) and non-guaranteed payout (up to 2.43% pa) | Monthly | – | – Capital guaranteed from end of 6th policy year | Not indicated | ||
GREAT Prime Rewards 3 | 15, 20 | SP | (Death, Disability & TI) higher of: (i) 110% of single premium less survival benefits already paid; or (ii) the guaranteed surrender value of the policy | Yes; annual payout for 10, 15, 17 or 20 years | Annual | Yes, able to withdraw any accumulated annual income and bonuses from income | – | – Capital guaranteed at end of 5th policy year | Not indicated | |
Prestige Life Rewards 5 Special (only available till 31 July 2022) | Whole Life | SP | (Death & Disability) Coverage varies across age bands | Yes; guaranteed monthly payouts for life starting from 19th to 24th policy month at 3.35% p.a. of the SP | Monthly | No | – | – Surrender value of 80% of the premium paid from day one | Not indicated | |
China Taiping | i-Cash (III) | to age 85 | 5, 10 | (Death) higher of: (i) guaranteed surrender value or (ii) 105% of total premiums paid plus non-guaranteed terminal dividend | Yes; guaranteed yearly cashback equivalent to 1.0% and a non-guaranteed yearly cash dividend of up to 7.2% of basic sum assured from end of premium term | Annual | No | – | – Maturity benefit at 85 – Capital guaranteed | Not indicated |
i-Saver8 | 8 | 2 | (Death) 105% of the total yearly premiums paid and a non-guaranteed bonus | No | – | No | up to 3.13% pa | – Capital guaranteed at maturity | Not Indicated | |
i-WealthSaver | 10, 15, 20 or 25 | SP, 5, 10, 15 or 20 | (Death) higher of: (i) 105% of the total premiums paid ; or (ii) 101% of Guaranteed Surrender Value; plus reversionary bonus and non-guaranteed terminal bonus | No | – | No | up to 3.60% pa | – Capital guaranteed as early as y5, dependent on premium term | Not Indicated | |
Manulife | Ready LifeIncome (III) | up to age 120 | 5,10 | (Death & TI) higher of (i) 101% of the total premiums paid to date (less any advance premiums); or (ii) the guaranteed surrender value; plus any claim bonus and accumulated income and its interest | Yes; starts from end of policy year 5 or 10, boost in yearly income from policy year 25 onwards | Annual | No | – | – Freeze premiums for up to 1 year – Lump sum benefit if retrenched – Premium waiver upon disability | Not indicated |
Manulife GrowSecure | 16 or 18 | 5, 8 or 10 | (Death & TI) higher of: (i) 105% of (the total premiums paid on the basic plan less any advance premiums paid, or (ii) the guaranteed surrender value plus any reversionary bonus and non-guaranteeed claim bonus | No | – | No | – | – Capital guaranteed at maturity – Premium waiver upon disability – Premium freeze in times of need for 1 year – Additional payout of 50% of total premiums paid to date in the event of accidental death | Not indicated | |
Manulife IncomeGen | up to age 120 | 3 | (Death & TI) higher of: (i) 105% of (the total premiums paid on the basic plan less any advance premiums paid, or (ii) the guaranteed surrender value plus any non-guaranteeed claim bonus and monthly income which has built up interest | Yes; lifetime monthly income from end of 49th policy month | Monthly | Yes, able to withdraw any accumulated annual income and bonuses from income | – | – Disability premium waiver – Maturity Benefit at age 120 – Additional payout of 50% of total premiums paid to date on accidental death | Not indicated | |
Manulife Spring (II) | 12 | 3, 6 | (Death, Disability & TI) higher of: (i) 105% of (the total premiums paid on the basic plan less any advance premiums paid, or (ii) the guaranteed surrender value plus any non-guaranteeed claim bonus, reversionary bonus, and GCB which has built up interest | Yes; yearly cash benefits from end of 3rd or 6th policy year | Annual | Yes, able to withdraw any accumulated annual income and bonuses from income | up to 2.87% pa | – Capital guaranteed at maturity – Off set premiums with guaranteed cash payouts | Not indicated | |
ReadyBuilder (II) | Whole Life | SP, 5, 10, 15, 20 | (Death & TI) higher of: (i) 105% of the premium paid; or (ii) 101% of the total surrender value | No | – | Yes | – | – Perpertual plan (no maturity) but able to withdraw – Freeze premiums for up to 1 year – Lump sum benefit if retrenched – Premium waiver upon disability for regular premium policies | Not indicated | |
Tokio Marine | TM Nest Egg II (Flexisaver) | 15 to 30 | 5, 10, 15 | (Death & TI) higher of (i) 101% of the Total Annual Premiums paid less all Guaranteed Monthly Cash Payout paid, or (ii) the amount equivalent to 12 Guaranteed Monthly Cash Payout plus non-guaranteed terminal dividend and any accumulated cash benefit with interest | Yes; monthly cash benefit with guaranteed and non-guaranteed portion Payout duration from 10, 15 or 20 years | Monthly | No | – | – Capital guaranteed upon start of monthly payouts | – CI, ECI, Cancer Premium Waiver Rider – Payor Benefit Rider |
TM Nest Egg II (Cashback 8/10) | 10, 12 | 2 | (Death) 101% of the total annual premiums paid | Yes; starting from the 2nd policy anniversary 8-year: 8% of sum assured 10-year: 10% of sum assured | Annual | Yes, able to withdraw any accumulated annual income and bonuses from income | up to 2.72% | – guaranteed benefit of up to 140% of the Sum Assured, plus a non-guaranteed bonus | Not indicated | |
*Some insurers indicate a rough projection of the interest rates you can earn on their product brochures. Do note that these rates are not guaranteed unless stated on the brochure. |
Best Endowment Plan in Singapore
Personally, it would be very hard for me to name the best endowment plan because people purchase endowments for very different reasons, and there is no one endowment that is able to cater to everyone’s needs.
However, if you really had to press me, the one that comes closest to this title would be Singlife with Aviva’s MyLifeIncome III.
Singlife with Aviva’s My LifeIncome III
The reason is that it is a plan that provides cash payouts but also has no set maturity date, which would be able to cater to a range of different needs.
With the cash payouts, you have the option to receive the payouts or let them accumulate to earn extra interest, based on your needs.
For those who are looking to just grow their monies, but have no set goal their saving for, they can hold the product as long as they require.
While for those who have a set goal they’re working towards, they can estimate the sum of money they require and at what age, and ensure that the premium they put in will get them this sum of money when they require based on the projections in the policy illustration.
Apart from the above, it comes with a decent range of premium terms.
And the feature that sets it apart from the others is the booster bonus of 0.35% of your SA which increases your payouts, helping to alleviate the impact of the rising cost of things.
Best Endowment Plan with Highest Guaranteed Returns
Prudential PRUActive Saver II | Singlife with Aviva MyChoiceSaver | GE GREAT Flexi Goal | AIA Smart Flexi Growth | |
Total Premiums | $37,500 | $36,945 | $37,500 | $37,500 |
Guaranteed Return | $38,254 | $38,000 | $34,166 | $33,750 |
Non-Guaranteed Return | $8,288 | $7,654 | $11,724 | $11,675 |
Total Potential Returns | $46,542 | $45,654 | $45,890 | $45,425 |
Illustrated returns @ 4.25% Illustrated Rate of Return for 30yo, Male, Non-Smoker, Regular Premium 15 year Plan, No Cash Payout
Prudential PRUActive Saver II | Singlife with Aviva MyChoiceSaver | Manulife GrowSecure* | AIA Smart Flexi Growth | NTUC Income Grow Saver Flex | |
Total Premiums | $50,000 | $49,350 | $49,949 | $50,066 | $50,000 |
Guaranteed Return | $54,248 | $55,000 | $51,902 | $53,235 | $53,019 |
Non-Guaranteed Return | $29,848 | $25,286 | $24,361 | $29,990 | $28,734 |
Total Potential Returns | $84,096 | $80,286 | $76,263 | $83,225 | $81,753 |
Illustrated returns @ 4.25% Illustrated Rate of Return for 30yo, Male, Non-Smoker; Limited Premium, Pay 10 years, 20 year Policy Term, No Cash Payout
*Note: Policy term is only 18 years, not 20 years.
I’ve tried to standardise the plans for comparison within the 2 tables above, but since most plans don’t have the same policy and premium term options, there will be some differences.
After analysing the 2, just a simple change in the policy and premium term affects the plan with the highest guaranteed returns.
In fact, many factors including but not limited to your premium amount and term, your policy term, option for cash payouts, the insurer’s par fund performance, the distribution cost, and many others affect the overall returns on endowment plans.
Therefore, it is inaccurate and difficult to qualify and name one specific plan to be crowned the plan with the highest guaranteed returns across all factors.
If getting a plan that will give you the highest return is your highest priority, it is more advisable to compare the policy illustration values for the plans you’ve shortlisted which are suited to your needs, instead of comparing the number marketed on the product brochures.
Singlife with Aviva’s MyEasySaver II
One honourary mention in this area is Singlife with Aviva’s MyEasySaver II, which actually commits to a lump sum guaranteed maturity payout of 160% of the sum assured, less all payouts, but including any bonuses.
Most of the other plans don’t really advertise the amount of their guaranteed payout at maturity.
The only other insurer who does this at the moment is Tokio Marine’s ™ Nest Egg II, which has a guaranteed maturity payout of 140% of sum assured.
Best Endowment Plan for Lifetime Payouts
One of the endowments that fits this bill and would give the “best” endowment (MyLifeIncome III) a run for its money is Manulife’s Ready LifeIncome (III).
Manulife’s Ready LifeIncome (III)
Like the former, it’s a plan that provides lifetime income, with no maturity date. However, if you wish to, you can surrender the plan early for its cash value.
It boasts a premium waiver upon disability, a lump sum benefit upon retrenchment, and the option to freeze premiums for 1 year.
However, where it falls short of MyLifeIncome III is that it only has 2 premium term options, and its annual cash payout is only up to 3% of the SA (vs up to 5.6%).
Manulife’s ReadyBuilder (II)
Alternatively, if you do not care for the cash payout option for a whole life endowment, its sister plan, the Manulife ReadyBuilder (II) makes for a good option as well for a plan without maturity.
This plan allows you to make partial withdrawals of the surrender value, without compromising on your capital after a certain number of years, based on your selected premium term.
Manulife’s Ready LifeIncome (III)
Manulife ReadyBuilder (II)
Best Supplementary Retirement Scheme (SRS) Endowment Plan
The supplementary retirement scheme is a voluntary savings scheme introduced by the government to help us ensure that we’re retirement ready.
You can utilise the money in your SRS to invest for your retirement as the interest in the SRS account leaves much to be desired.
Singlife with Aviva’s MyLifeIncome III
Once again, Singlife with Aviva’s MyLifeIncome III tops the table in this area.
What I like about this plan is that it’s a whole-life plan and with its cash payouts, you’re essentially guaranteed a retirement income for the rest of your life.
You can also choose your accumulation period with options up to 20 years. This allows you to choose to start your cash payouts at the age that you plan to retire.
What’s more, the additional booster bonus gives you the peace of mind that your monthly payouts can offset some of the effects of inflation.
However, what would have made the plan better would be the option to receive the payout on a monthly basis, but that’s just me being nitpicky.
Best Endowment Plan for Highest Cash Payouts
AIA’s Smart Flexi Rewards (II)
If we’re comparing the insurance savings plans that provides cash payouts, AIA’s Smart Flexi Rewards (II) wins by a mile, giving you payouts as high as 40% of the insured amount starting from year 4.
Premium and policy term-wise, the choices for AIA’s Smart Flexi Rewards (II) aren’t too shabby either.
You can opt to go for a 5 or 10-year limited pay plan, or a regular payment plan (i.e. policy term = premium term).
Do note that for the regular payment plan, capital is not guaranteed.
China Taiping’s i-Cash (III)
The next closest is China Taiping’s i-Cash (III) with the possibility to get up to 8.2% in cash dividends, of which only 1% is guaranteed.
Given that it’s in the insurer’s best interest to ensure that you get consistent returns (so that you don’t surrender), I’d feel pretty confident in getting these returns from China Taiping.
AIA’s Smart Flexi Rewards (II)
China Taiping’s i-Cash (III)
Best Single Premium Endowment Plan
As with all endowments, the best single premium plan depends on your needs.
But if you have a lump sum of money set aside, and you don’t know what to do with it, then choosing an endowment which you can hold perpetually is a good choice.
It allows you to keep your money inside for as long as possible and let compound interest do its work.
Whereas if you choose a plan with a maturity date, if you don’t require the cash at maturity, you’ll need to search the market for another endowment again.
You’d also want to have the option to access that cash value as soon as possible, just in case you need it.
Manulife ReadyBuilder (II)
Out of all the plans that fit the above criteria, Manulife’s ReadyBuilder (II) would be my pick because it has an added retrenchment benefit lump sum payout. Do note that this benefit is only applicable to the first 5 policy years.
In this case, I did not consider plans with a cash payout as I assume that you’re investing the lump sum of money because you already have sufficient emergency funds set aside and do not need to supplement your income.
Most Flexible Endowment Plan
Prudential’s PRUActive Saver III
Let’s say you’re looking to save for a specific goal in the future, but the number of years to that goal isn’t a nice round number like 15 or 20 years, and you only want to receive the money in said year, no earlier and no later.
Or perhaps you’re looking to pay premiums for a certain number of years, like 6 or 13 years?
With Prudential’s PRUActive Saver III, you have the flexibility to pick and choose any permutation of policy and premium term which falls into the range offered, making it arguably one of the most flexible in this area.
Best Short-Term Endowment Plan
Name of Plan | Expected Returns | Policy Term | Minimum SP | Protection |
Manulife Goal 10 | 3.54% (3.39% guaranteed) | 2 years | 10,000 | 101% of SP |
NTUC Income Gro Capital Ease Eco | 1.82% Guaranteed | 3 years | 10,000 | 105% of SP |
China Taiping i-Save | 1.8% Guaranteed | 3 years | 50,000 | 105% of SP |
2.3% Guaranteed | 3 years | 10,000 | 101% of SP | |
Great SP Series 7 | 2.3% Guaranteed | 2 years | 10,000 | 105% of SP |
Last but not the least, short-term endowments. Looking at the short-term plans as shown above, the returns are generally similar.
Manulife Goal 10
But what stands out the most is the Manulife Goal 10 with 3.54% returns, 3.39% of which is guaranteed.
Now that’s some pretty good returns!
Due to the nature of these short-term endowments, where they’re only available for a limited time or in limited amounts, at any one time, there are only 1 or 2 of such products across the market.
Therefore, there’s no real need to compare the short-term endowment plans.
If you have the spare cash set aside and you’re set on purchasing a short-term endowment, once there is one in the market, just go for it before it becomes oversubscribed.
But of course, short-term commitment is still a commitment, so only put in money that you don’t have an immediate need for.
Things to note when choosing an endowment plan
Policy Term
Some endowment plans require you to park aside your money for a specified period of time, known as the policy term.
This holding period should be considered carefully because if you were to surrender your plan early, you might incur losses and may not even get your initial capital back.
Once the policy matures, most endowments usually guarantee your capital at least.
More details on your estimated maturity value can be found in the policy illustration, varying across companies and products.
Some plans offer a policy term in multiples of 5, while others let you select from a range of years giving you the flexibility to choose the specific age you want your plan to mature.
If you’re saving up for a specific goal like children’s education, house upgrade, starting your own business, etc., consider selecting a plan with a policy term that ends closest to when you would need the money to maximise your returns.
Apart from fixed maturity endowments, there are also whole-life endowments that only mature when you’re above 100 years old in the market.
These plans are usually designed for those looking to leave an estate for future generations.
Long- vs Short-Term Policy
In the past, endowment plans were long-term with minimum commitment periods of 10 years or more.
But over the years, insurers have been launching short-term endowment plans with a term of 3 years or less.
If you’ve no immediate need for your money but don’t want to lock your money for the long term, these short-term plans are worth considering, as they enjoy interest rates that are generally higher than the bank.
Do note that these short-term endowments are usually launched on an ad-hoc basis with limited quantities, so the fastest fingers first.
Opting for a plan with a shorter term does come with a trade-off – which is that the returns may not be as attractive as a long-term plan.
This is due to the concept of compound interest, where you earn interest on your interest.
With this, generally the longer you hold an investment, the better your returns.
Premiums
Premium Amount
Endowment plans make your money work harder for you.
But it’s not just about throwing all your cash on hand into an endowment product because as mentioned, an early surrender could lead to losses.
The rule of thumb is to ensure that you’ve set aside emergency savings, usually 3 – 6 months of your annual income before you start investing.
Remember to select a premium amount that is within your means.
If you’re unable to finance your premiums, your plan will lapse, which could mean losing the premiums you’ve paid thus far.
Whether your budget is $100 or $100,000, there is a plan for everyone.
Different products have different maximum and minimum premiums, so do take note of this.
Premium Term – Regular vs Single Premium
If you have a lump sum of money readily available, you can choose to pay your premiums in a single premium, and just leave your money to roll and accumulate.
But fret not, even if you don’t have a large sum of money set aside, you can still opt for regular premium plans, where you pay your premiums for a certain number of years.
This premium term can be as long as your policy term or shorter.
With a regular premium plan, you might also have the option to choose how often you’d like to pay premiums in a year.
Premium frequency options range from annual, biannually, quarterly, or monthly.
If you find yourself living paycheck to paycheck, consider investing in a regular premium product, as a form of forced savings.
While you enjoy life in the current moment, it’s good to pay your future self so that you can enjoy in the future as well.
Regardless of the premium term, the earlier you fully pay up your premiums, the longer time that your money has to grow.
Protection
Another name for endowment plans are insurance savings plans, and as their name suggests, there is an element of protection in endowments.
Do note that the level of protection offered by endowments is not very high and is usually a percentage of the total premiums paid or the surrender value.
This level of coverage is insufficient if it is your only life insurance policy.
However, it is good if you are more focused on investment, but still want some coverage to complement your existing coverage.
If you’re looking for a protection plan, a whole life insurance or term life insurance plan might be better suited for your needs rather than an endowment plan.
Liquidity
Cash Payouts
For those who want to grow their monies, but also want to ensure some liquidity for small indulgences or to help you pay off your liabilities, some endowments come with a feature that provides you with cash payouts.
These payouts are usually a small percentage of your plan’s face value, often ranging between 3 – 5%.
The face value is usually calculated based on a percentage of the total premiums you’re expected to pay and varies across plans.
Payouts are usually paid annually, but some plans might offer a monthly option.
These plans usually allow you to choose whether you want to receive the cash payouts or leave them in the plan to accumulate, letting you start or stop the payouts as and when you require.
There is a give and take if you do choose a plan with this feature, and that is that your returns may not be as high as a plan that does not provide payouts.
If you’re looking for cash payouts, although some endowment plans allow for this, they’re not designed for it.
You can consider getting an annuity policy instead if cash payouts are your thing.
Premium Loans
In the event that you really need the money urgently, but do not want to surrender your plan, some plans allow you to withdraw some money from your plan and take a premium loan.
Doing so might affect the long-term value of your plan as you’re reducing the value inside your plan, meaning that the interest you earn would not be as high.
Most insurers will also charge interest on the loan that you take from your policy, which would need to be paid back.
If not paid back, this interest will be deducted from your maturity payout at the end of your policy term.
If the interest incurred exceeds the surrender value in your plan, it will terminate and you would not get back anything, and lose your capital.
So, if you do take a premium loan, do monitor it to minimise any possible losses.
Partial Withdrawal / Surrender
In rare cases, some plans offer you the option to partially surrender some of the cash value in your plan, without having to pay it back or incur an interest.
Be careful not to mix up this option with the premium loan option.
If you’re unsure, it’s always good to consult your financial advisor. If you don’t have one, we can always link you up with an advisor.
A partial surrender will also affect the plan’s maturity value, so do consider all your options before you choose to exercise this option.
Expected Returns
Participating Fund Performance
Insurance savings plans take part in the participating fund of the insurer. This fund invests in various instruments and assets which differ across insurers.
Your premiums are pooled together and invested into this fund.
Depending on the performance of the fund, bonuses would be declared and added to your plan, which makes up a portion of your returns.
Looking at an insurer’s par fund performance will give you a rough gauge of how likely they are to actualise the returns illustrated in the policy document, or perform better.
However, do also note that past performance is never an indicator of future performance.
Guaranteed vs Non-Guaranteed Returns
In the illustration provided by the insurer, the cash value is split into 2 – a guaranteed and non-guaranteed portion.
The guaranteed return is the minimum amount the insurer promises to return you if you surrender your plan or when your plan matures.
The non-guaranteed portion provides an estimate of any additional returns that you might get from your plan but there is no full guarantee that you’ll receive this.
It can be affected by the participating fund performance, expenses incurred, and the claims and surrender experience of all participating products under the insurer.
It’s recommended to take note of the guaranteed returns.
At maturity, you’d want your guaranteed returns to at least be able to beat your maturity payout.
After all, there is an opportunity cost if you choose to lock your money in an endowment instead of another investment instrument such as an investment-linked policy.
If your guaranteed returns can’t beat your capital, your capital is at risk if the plan’s non-guaranteed returns are not realised.
A good rule of thumb is to check the policy/benefit illustration and check which year you’ll “breakeven” if any.
The breakeven year is determined by when your guaranteed returns are equal to your total premiums paid.
Others
Supplementary Benefits
Premium Waivers
Most plans allow you to add on premium waivers in the event of disability or critical illness at a nominal fee.
It’s generally recommended to add these waivers to prevent your plan from lapsing in the event that you’re unable to work and fund your premiums due to disability or illness.
Not only do you lose your capital if your plan lapses, but you lose time as well.
Personal Accident
You might also be able to add personal accident riders to your plan as well.
These riders usually cover medical bills and traditional Chinese medicine bills incurred due to accidents.
Some might even cover certain illnesses like food poisoning and dengue fever.
For more details, refer to the policy document or ask your financial advisor.
Death/TPD/TI
Conclusion
It’s no secret. Insurance savings plans have received flak in terms of the returns they can achieve as compared to a pure investment product.
This is in part due to the cost of distribution of these products and the protection coverage it provides, amongst other factors.
However, that doesn’t mean that it can’t have a place in our overall investment portfolio.
Endowment plans are generally lower in risk as compared to investing in stocks, ETFs, cryptocurrencies etc., and they generally guarantee your capital back plus more at maturity.
Since the risk is lower, naturally, the returns would not be as attractive either.
However, this makes for a good product to help you diversify your portfolio, or if you have a specific financial goal you’re working towards with a fixed deadline.
If your risk appetite is on the lower end, there’s also no shame in getting an endowment so that you can make your money work harder for you, without having to take on risks that you’re unwilling to accept.
Insurance savings plans are a tool to help us achieve our financial goals.
All of our circumstances differ, so the road to realising our financial goals differ.
The best endowment for me might not be the best for you.
Want to find out more about endowments and get advice on which is the best endowment plan for you?
Speak to one of our unbiased, knowledgeable advisors who are well-versed in this area today!