Guide to Savings / Endowment Plans In Singapore [2025]

Guide to Savings / Endowment Plans In Singapore

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Savings Endowment Plans In Singapore

Getting serious about saving but find it hard to stick to a plan?

Or maybe you’re looking for a low-risk way to grow your money for specific life goals?

Endowment plans could be the answer – offering a blend of savings and insurance to help you save consistently and reach those big milestones.

In this post, you’ll learn:

  • What an endowment plan is and how it works
  • The different types of endowment plans in Singapore
  • The benefits and potential drawbacks to consider
  • Alternatives to endowment plans if you’re looking for other options

 

If you’re ready to take control of your financial future, dive in and see if an endowment plan is right for you.

What is an endowment plan & how does it work?

An endowment plan is a unique type of insurance product that combines the elements of savings and insurance, giving you the best of both worlds.

Think of it as a way to save towards a big goal, like saving for your child’s future education or a comfortable retirement, while still having the safety net of life insurance.

Part of what you pay in premiums goes towards a savings or investment component, and the rest ensures you’re covered if something unexpected happens.

When the policy “matures” – meaning it reaches its set end date – you’ll receive a payout.

This maturity benefit typically includes the sum assured plus any bonuses that have accrued along the way.

Now, here’s the insurance part.

Most endowment plans include life insurance coverage, meaning that if you pass away during the policy term, your beneficiaries will receive a payout – sometimes even higher than the maturity benefit.

Some plans offer additional coverage for terminal illness or permanent disability, giving you extra peace of mind.

Types of endowment plans in Singapore

Participating endowment policies

A participating endowment policy, often called a “par” policy, allows you to “participate” in the insurer’s investments.

Part of your premiums go into a participating fund managed by the insurance company.

This fund is typically invested across assets like equities, bonds, and real estate, aiming for long-term growth.

As these investments generate returns, they contribute to the bonuses added to your policy.

The main attraction of participating policies is their potential for additional bonuses.

Unlike fixed savings, these bonuses can increase the overall payout you receive at maturity.

Non-participating endowment policies

Non-participating endowment policies, commonly called “non-par” policies, don’t involve investment in the insurer’s participating fund.

Instead, they offer fixed, guaranteed returns, making them easy to understand.

This endowment plan provides a guaranteed payout at the end of the policy term, so you know exactly what you’ll receive when the policy matures – no surprises.

One of the key features of non-participating policies is their shorter lock-in periods, which can be as brief as 1 to 3 years.

This makes them popular among those who want a flexible savings option with a guaranteed return in a relatively short timeframe.

Annuity endowment policies

With an annuity endowment policy, you receive regular payouts – typically on a monthly or annual basis – during the policy term.

This structure can be especially useful for covering ongoing expenses or supplementing your income.

Many people use these policies to fund their retirement, as the periodic payouts can act as a steady income to support their lifestyle without dipping into their other savings.

If you’re interested in learning more about retirement-focused annuity plans, you can find additional insights here.

Benefits of endowment plans

Long-term savings for specific goals

Whether you’re planning for your child’s education, a dream home, or a comfortable retirement, an endowment plan helps you save systematically towards that objective.

Unlike regular savings accounts, an endowment plan has a built-in structure to keep you committed.

This ensures you reach your financial goal without the temptation of early withdrawals.

The consistent premiums you pay go towards building a sizeable sum over time, which you’ll receive when the policy matures.

Usually capital guaranteed

As long as you hold the policy to maturity, you’re generally assured of receiving back at least the total amount you paid in premiums.

This makes endowment plans a safer option for conservative savers who want the benefit of disciplined saving without exposing their capital to market risks.

Even if there are fluctuations in the economy or the insurer’s participating fund doesn’t perform as expected, your principal amount remains intact.

This feature is especially valuable for risk-averse individuals focused on preserving their savings rather than seeking high, unpredictable returns.

Low-risk way of growing your funds

Unlike direct investments in stocks or mutual funds, which are subject to market volatility, endowment plans offer a more stable avenue for savings.

While they may not yield high returns like some investment products, they provide a balanced approach to wealth accumulation by combining guaranteed benefits with the potential for additional bonuses, especially in participating policies.

For conservative savers, an endowment plan allows you to benefit from steady, predictable growth with minimal exposure to risk.

SDIC protected

Another reassuring feature of endowment plans in Singapore is that they’re protected by the Singapore Deposit Insurance Corporation (SDIC).

This means that in the unlikely event that your insurer encounters financial difficulties, your endowment plan is still safeguarded up to certain limits.

Currently, SDIC provides coverage of up to S$100,000 per life insured per insurer.

This protection offers added security for policyholders, knowing that their savings are not only safe from market volatility but are also backed by regulatory safeguards.

Additional death coverage

While primarily designed as a savings tool, most endowment plans also include a life insurance component.

This means that, besides accumulating savings, you’re also protecting your loved ones in case the unexpected happens.

If you pass away during the policy term, your beneficiaries will receive a payout, which can sometimes exceed the maturity value of the policy.

This feature is particularly valuable if you have pre-existing medical conditions that make it challenging to obtain standalone life insurance.

Many endowment plans don’t require extensive health checks, allowing individuals with medical conditions to access a certain level of life coverage without the hurdles they might face with traditional life insurance policies.

Disadvantages of endowment plans

Lower returns than other investment options

One of the main drawbacks of endowment plans is that their returns tend to be lower compared to other investment products like stocks, mutual funds, or even certain types of unit trusts.

While endowment plans are designed for stability and low risk, this often comes at the expense of higher potential growth.

If your primary goal is maximising returns and you’re comfortable with a certain level of risk, options like DIY investing or investment-linked policies (ILPs) may offer better long-term gains.

Long lock-in periods

Typically, these plans require you to commit for several years – sometimes even decades – to maximise the benefits.

Cashing out early usually results in penalties or reduced payouts, meaning you won’t receive the full maturity benefit if you decide to exit prematurely.

This lock-in period can be a disadvantage if your financial situation changes, as it limits flexibility.

Unlike a savings account where you can access funds anytime, endowment plans are best suited for individuals with long-term financial goals who are confident they can commit to the duration.

If liquidity is a concern, or if you foresee a need for quick access to funds, the lock-in nature of an endowment plan might not align well with your financial needs.

Things to consider when buying endowment plans

Your financial goals

Think about what you’re saving for and the timeline for reaching that goal.

Are you looking at a short-term plan to accumulate savings within 5 years, or a long-term plan for retirement or education funds?

Different plans cater to different goals, so aligning your objective with the plan duration is crucial.

I use the Financial Toolkit’s financial goals tracker to list out all my goals and how far I am from them.

tft savings & investing goals

This takes into account:

  1. How much I need for my goals,
  2. How much I currently have for each goal,
  3. How long more I have,
  4. My regular contributions, and
  5. The interest rate I’m earning for them.

 

With this, I know if I can meet my goals and whether an endowment plan (or any investments/savings, tbh) is enough.

Guaranteed vs. non-guaranteed returns

Understand the balance between guaranteed and non-guaranteed returns.

Some plans offer higher guaranteed payouts, while others may include non-guaranteed bonuses that depend on investment performance.

If you’re risk-averse, a plan with a stronger guaranteed component might be preferable.

I suggest reading my post on participating funds (the investment component of an endowment plan) and how it affects your returns.

Premium commitment

Endowment plans require regular premium payments, so assess if you can comfortably afford the premiums for the policy duration.

Missing payments may lead to penalties or reduced benefits.

Some plans offer flexible premium terms, which might be useful if you foresee changes in your financial situation.

Policy term and lock-in period

Review the policy term and lock-in period carefully.

Endowment plans generally work best for long-term savings due to their maturity benefits, so be sure you’re prepared for the commitment and don’t need early access to your funds.

Additional coverage options

Many endowment plans include optional riders for enhanced coverage, such as critical illness or disability benefits.

If extra coverage is important, check if the plan allows you to add these riders.

For a more comprehensive guide, you can explore my post on how to choose endowment plans or read my post on the best endowment plans.

Are there any alternatives to endowment plans?

Topping up your Central Provident Fund (CPF) Retirement Account (RA)

If your primary goal is retirement savings, topping up your CPF RA can be a highly effective alternative.

CPF is designed specifically to support retirement needs in Singapore, offering attractive, risk-free interest rates that often surpass the guaranteed returns from endowment plans.

If your endowment plan is primarily intended for retirement, CPF top-ups could be a more beneficial route due to its guaranteed, high-interest rates and the tax advantages it offers.

Additionally, as a government-backed scheme, CPF gives you peace of mind, knowing that your retirement funds are secure and will provide for your future needs.

Supplementary Retirement Scheme (SRS)

Another solid alternative for retirement-focused savings is the Supplementary Retirement Scheme (SRS).

The SRS is a voluntary savings scheme in Singapore that encourages individuals to set aside funds for retirement while enjoying immediate tax benefits.

If you’re looking to boost your retirement savings with more flexibility than CPF top-ups, the SRS could be a suitable option.

If your main goal is retirement and you’re looking for both tax efficiency and investment options, the SRS offers more flexibility and potential growth compared to traditional endowment plans.

It’s a practical choice for those comfortable with some investment risk and who want more control over their retirement savings strategy.

High-yield savings accounts

If you prefer an alternative to endowment plans that offer growth and easy access to your funds, a high-yield savings account could be a great choice.

These accounts provide higher interest rates than standard savings accounts and are ideal if you value liquidity and want the flexibility to access your money anytime.

They offer a safe, straightforward way to earn interest on your savings without the constraints and risks associated with longer-term investment options like endowment plans.

Investment options

If you’re aiming for higher returns and have a longer investment horizon, various investment options may serve as an effective alternative to endowment plans.

Unlike endowment policies, which focus on steady, guaranteed savings with minimal risk, investment products like stocks, ETFs, REITs, or corporate bonds can offer higher potential returns.

However, they require a greater comfort level with risk, as their values can fluctuate.

Who are endowment plans for?

Those who struggle to save consistently

Endowment plans require you to commit to fixed, regular premiums over a set period, essentially “forcing” you to save.

By making saving a requirement rather than an option, endowment plans help you build a disciplined habit.

This is especially beneficial for those who might be tempted to dip into their savings prematurely, as the policy’s lock-in period encourages you to stay on course until maturity.

People looking for a low-risk place to store funds for specific milestones

If you’re aiming to save for a specific financial milestone, like your child’s education, a future wedding, or even retirement, an endowment plan offers a low-risk avenue to grow your money steadily.

Unlike riskier investments, endowment plans provide a guaranteed component and often capital protection, ensuring you don’t lose your initial savings if you hold the policy to term.

This makes them appealing to those with clear financial goals who want a predictable, safe way to reach them.

Those looking to stabilise their investment portfolios

I recently read a Reddit thread about how you can use endowment plans to stabilise your investment portfolio – something that I think makes sense and merit.

If you’re overexposed to certain asset classes or would like something to balance out your risks, then an endowment plan is a great option for you.

It provides a guaranteed portion, guarantees your capital, and has more stable returns – something that most of its alternatives cannot provide.

Frequently asked questions

Is an endowment plan a good investment?

An endowment plan can be a good investment for specific groups, especially those who struggle to save consistently or want a low-risk savings option with insurance coverage.

However, I don’t consider it the best choice for my own financial goals, as I’m willing to take on more risks with my money.

How much should I invest in an endowment plan?

How much you should invest in an endowment plan depends on your financial goals and budget.

Ideally, you should choose an amount that fits comfortably within your monthly expenses while allowing you to commit to the plan for the entire term.

A good rule of thumb is to ensure the premiums don’t strain your finances, so you can keep up with payments without compromising other financial priorities.

What happens if I terminate my endowment plan early?

If you terminate your endowment plan early, you’ll likely face penalties and may only receive a surrender value, usually less than the total premiums you’ve paid.

Early termination often results in a significant loss, especially in the initial years of the plan, as fees and costs are front-loaded.

It’s essential to consider the long-term commitment before purchasing an endowment plan to avoid potential financial loss.

Is a short-term endowment plan better for quick returns?

Yes, a short-term endowment plan can be a good choice for quick returns, especially if it offers higher returns than fixed deposits or high-yield savings accounts.

These plans often have shorter lock-in periods, making them suitable for those seeking a low-risk savings option with more growth potential.

However, always compare the returns and terms with other savings products to ensure they are the best fit for your goals.

Conclusion

Endowment plans are a unique mix of insurance and savings, designed for those who want a disciplined way to save for specific goals with a touch of financial security.

We’ve looked at what endowment plans are, how they work, the different types available, and some key benefits and drawbacks.

If you’re after a low-risk savings option that helps you stay committed, or if you’re eyeing a specific milestone, an endowment plan could be a solid choice.

But there are alternatives, too, like CPF top-ups, SRS accounts, high-yield savings, and other investment options, especially if you’re willing to take on more risk.

If you’re still unsure whether an endowment plan fits your needs, don’t worry.

Saving and planning can be complex, but you don’t have to go it alone.

Feel free to reach out, and we can connect you with one of our financial advisor partners for a free chat.

They’ll help you figure out the best approach based on your goals, so you can make a choice that’s right for you.

Picture of Firdaus Syazwani
Firdaus Syazwani
In 1999, Firdaus's mother bought an endowment plan from an insurance agent to gift him $20,000. However, after 20 years of paying premiums, Firdaus discovered that the policy was actually a whole life plan with a sum assured of $20,000, and they didn't receive any money back. This experience inspired Firdaus to create dollarbureau.com, so that others won't face the same problem of being misled or not understanding what they are purchasing – which he sees as a is a huge problem in the industry.

Disclaimer: Each article written obtained its information from reliable sources and should be purely used for informational purposes only. The information provided by Dollar Bureau and its affiliated parties is not meant to be construed as financial advice. Dollar Bureau shall not be held liable for any inaccuracies, mistakes, omissions, and losses incurred should you act upon any information listed on this website. We recommend readers to seek financial planning advice from qualified financial advisors. 

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