With savings accounts interest rates dipping ever since COVID-19 hit, many insurers have launched short-term endowment plans as an alternative way to grow your savings.
Traditionally, endowment plans were a savings/insurance hybrid product, typically recommended as a way to save for your child’s education, your retirement, or some other fixed milestone.
Recently, though, there has been a new crop of short-term endowment plans. Instead of taking a decade or more to reach maturity, these endowment plans mature in just two to six years.
In light of low bank interest rates, even newbies to finance are getting curious about these products. With decent returns, short commitment periods and simple mechanics, short-term endowment plans are indeed a viable alternative to savings accounts or fixed deposits.
What are endowment plans?
Although provided by insurers, endowment plans are fundamentally savings plans to help you hit a target amount at a later date (e.g. your nest egg). After paying the premium, you wait for the funds to mature, then cash out a larger amount than you’ve put in.
Sounds simple enough, but the terminology around endowment plans can be confusing to those new to insurance. Let’s break them down.
Premium: This is the amount you pay for (put into) your endowment plan. It can either be a single premium (one-time lump sum payment) or staggered over several months or years. Single premiums are typical of short-term endowment plans.
Policy term: The time it takes for the endowment plan to mature. Conventional plans can stretch over 10 years, 15 years, 20 years or even up to a fixed age (e.g. 75 years old). But short-term endowment plans have a maturity period of two to six years. Note that you may not get the guaranteed returns or even your capital if you terminate your endowment plan early.
Capital guaranteed upon maturity: Some endowment plans are ‘capital guaranteed’ upon maturity. This means that, when you reach the end of the policy term, you will definitely get back at least the money you initially put in. However, there is no such guarantee if you terminate your plan before the end of the policy term.
Maturity benefit: Expressed as an annual percentage(e.g. 2% p.a.), this is how much return you will get on your initial investment upon the end of the term. Some endowment plans have only guaranteed returns, while other types may break down the returns into guaranteed and non-guaranteed components.
Participating or non-participating: Endowment plans typically involve the insurer putting your premiums into a ‘participating’ fund, akin to an investment done on your behalf (although you do not get to select the investment portfolio). If the fund performs well, a participating policy allows you to get a share of the profits (the non-guaranteed return), whereas you do not get anything above the guaranteed return for a non-participating policy.
Insurance coverage: A small portion of the money you put into an endowment plan goes into insurance coverage. For short-term endowment plans, this is quite minimal. For example, you might get insured 101% or 105% of the premium paid in the case of death or total permanent disability.
Tranches: Endowment plans, especially short-term and/or single premium plans, are not available forever. They are instead issued in ‘tranches’, similar to Singapore Savings Bonds issues. Each tranche contains a limited number of policies. Tranches with attractive returns close quickly, and you’ll have to wait for the next if you miss it.
Best short-term endowment plans in Singapore
If you have a lump sum of money you wish to grow in the short term, but do not want to take on the risk of investing it, here are five short-term endowment plans to consider.
|Endowment plan||Min. single premium||Policy term||Returns|
|NTUC Income Gro Capital Ease||$5,000 (online) / $20,000 (via agent)||2 years||1.85% p.a. (guaranteed)|
|DBS SavvyEndowment 3||$5,000||3 years||Up to 2% p.a.|
|Manulife Goal 6||$10,000||2 years||1.8% p.a. (guaranteed)|
|Etiqa Tiq 3-Year Endowment Plan||$10,000||3 years||2.1% p.a. (guaranteed)|
|LIC Grow Smart Endowment Plan||$20,000 ($10,000 x 2)||6 years||1.67% p.a. (guaranteed)|
NTUC Income Gro Capital Ease
NTUC Income Gro Capital Ease is a single premium endowment plan with a short commitment period of just two years.
Minimum premium: $5,000, which you can pay via eNets or PayNow. You can also use your Supplementary Retirement Scheme (SRS) funds. If you buy this through a financial advisor, the minimum is $20,000 instead.
Policy term: Two years. During this term, you are covered for death or total permanent disability (TPD) during this time. Should this happen in the first year, the payout is 100% of the premium; in the second year, the payout is 105%.
Maturity benefit: After two years, the insurance coverage expires and you can cash out the endowment plan at 1.85% p.a. That works out to a return of 3.73% total for the two years. If you bought a $10,000 premium, that means you’ll collect $10,373 at the end of the policy term.
Your capital is guaranteed at the end of the two-year policy term. Note that this is a non-participating endowment plan, so there are only guaranteed returns. There are no non-guaranteed returns on top of the 1.85% p.a.
Current tranche: Online applications for this tranche has ceased. You can still sign up for the NTUC Income Gro Capital Ease at physical Income branches on a first come, first served basis.
DBS SavvyEndowment 3
Another household name offering a short-term endowment plan is DBS (the insurance policy is underwritten by Manulife).
Minimum premium: $5,000. You can pay directly from your DBS/POSB bank account or your DBS SRS account.
Policy term: Three years. It has a basic death benefit of 101% of the premium.
Maturity benefit: DBS SavvyEndowment 3 is a participating endowment plan, so the returns are split into a small guaranteed component (2%, or about 0.6% p.a.) and a non-guaranteed portion that depends on fund performance.
If you bought a $10,000 premium, at the end of the policy term, you can cash out anything from $10,200 (guaranteed) to $10,612. Your capital is guaranteed at the end of the policy term.
Current tranche: The current tranche is open. You need to be a DBS/POSB customer to apply. Simply log in to digibank and your details will be pre-filled for a hassle-free application.
Manulife Goal 6
Manulife’s short-term endowment plan is called Manulife Goal 6. Although the underlying insurer is the same, this is an entirely distinct product from the DBS SavvyEndowment 3 plan covered above.
Minimum premium: Single premium of $10,000, payable via cash or SRS.
Policy term: Two years. During this term, you are insured 101% of the premium in the event of your death. During the policy term, you have the option of withdrawing the guaranteed return (1.8% p.a.) as a small payout. Otherwise you can leave it to accumulate more interest.
Maturity benefit: Apart from the guaranteed annual return of 1.8% p.a., you can also get a one-time maturity bonus of up to 0.16% (non-guaranteed) at the end of the policy term. This potentially brings your total return to as high as 3.78% over the two years.
If you bought a $10,000 policy and did not withdraw any annual payment, you can expect to cash out anything from $10,360 (guaranteed) up to $10,378 at the end of four years. Your capital is guaranteed only at the end of the policy term.
Current tranche: This Manulife endowment plan is currently open and you can find further details on the DBS website. There is no online application available; you need to speak to a financial consultant or apply at a bank branch.
Etiqa Tiq 3-Year Endowment Plan
If you have $10,000 to spare and don’t mind locking it up for three years, the Etiqa Tiq 3-Year Endowment Plan is well worth considering.
Minimum premium: $10,000 single premium, payable by bank transfer or PayNow. It is not SRS-eligible.
Policy term: Three years. There is a death benefit of 101% of the single premium you paid.
Maturity benefit: This endowment plan is non-participating and comes with a guaranteed return of 2.1% p.a. If you paid a $10,000 premium, you can cash out $10,643 at the end of the term.
However, make sure you can commit to the three-year period as there is no guarantee of your capital or the returns if you terminate the policy before maturity.
Current tranche: The current tranche is still open for online applications. You can apply via Etiqa’s website using SingPass MyInfo or with photos of your NRIC/FIN (front and back). Non-Singaporeans need to send in proof of address as well.
LIC Grow Smart Endowment Plan
LIC stands for the Life Insurance Corporation of Singapore. This is a relatively small player in Singapore’s insurance industry, but rest assured that any life insurance you buy is still covered up to $75,000 by the MAS-governed Policy Owners’ Protection Scheme.
Minimum premium: $10,000 annually for two years, so $20,000 in total.
Policy term: Six years in total. This period includes the first two years where you pay annual premiums. In the subsequent four years, you will not need to make payments but just wait for the policy to mature.
Maturity benefit: The LIC endowment plan features a tiered guaranteed return structure based on how much you put in. For the minimum premium of $20,000 ($10,000 x 2), it guarantees 1.67% p.a. after deducting insurance costs. Note that this is calculated based on simple interest instead of compounding interest like the others.
Illustration: If you paid $10,000 a year for the first two years, at the end of six years, you can cash out your plan at $21,914. This is a non-participating endowment plan.
Current tranche: The LIC Grow Smart Endowment Plan is currently open for applications. You need to download an application form via the link below, fill it out and mail it to LIC.
Should you get a short-term endowment plan?
The endowment plans shortlisted above are certainly attractive short-term alternatives to savings accounts, fixed deposits and even Singapore Savings Bonds.
In today’s climate, the options for growing your money risk-free are extremely limited. With endowment plans, your capital is guaranteed, the returns beat that of banks, and you also get a little bit of insurance coverage as a bonus.
But, however short the policy term, an endowment plan is still a commitment. Only park cash that you absolutely will not need in the next two or three years here. Should you need to terminate your policy early, you may lose money.
There are also trade-offs to locking up your funds. If interest rates were to rise within the next few years, you might not be able to take advantage of a good savings or fixed deposit promotion since your cash is parked in the endowment plan.
If you are comfortable with the commitment, then by all means apply for the endowment plan of your choice. Do act decisively though, as tranches are limited.
Read these next:
Best Savings Accounts in Singapore to Park Your Money (2020)
Regular Savings Plan (RSP): What They Are And The Best Ones To Invest In
Fixed Deposit vs Singapore Savings Bond (SSB) vs Savings Account: Where To Put Your Money?
Best Integrated Shield Plans in Singapore (2020)
Insurance Plans All New Parents Need In Their Portfolio
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