Endowment plans may seem similar to fixed deposits, albeit with better returns but don’t be mistaken! An insurance savings plan, aka endowment plan, is not the same as a savings account.
“Where should I put my money to grow?”, “Endowment plans safe anot?” These are common questions amongst Singapore residents, especially in wake of the growing inflation and costs of living. If you are considering an endowment plan to grow your funds, know that not all insurance savings plans are made equal.
At present, Tiq 3-Year Endowment Plan offers the highest guaranteed maturity returns in town* at 2.3% per annum, but do not take for granted that all endowment plans are capital guaranteed or provide guaranteed returns at maturity! Each endowment plan is structured differently.
Before you commit to one, consider your savings objective, risk appetite and tolerance. Scrutinise the product brochure and policy documents so you know what you are getting into. We hate to say this, but it can be easy to overlook important points or misunderstand the financial tools – even in the case of endowment plans. We’re here to point you in the right direction. Read on!
What is an endowment plan?
An endowment plan is an insurance savings plan that helps one to save regularly, with life coverage over a period of time. It typically combines life protection and investment but don’t mistake it with an insurance-linked policy. Endowment plans can be categorised as participating or non-participating.
Participating endowment policy: The potential returns are usually higher but the final payout may be higher or lower depending on the bonuses provided by the company. You may want to check if capital is guaranteed. As the returns are considered as non-guaranteed, the risk is higher.
Non-participating endowment policy: This plan does not participate in the profit generated by the company. Hence, there’s no additional bonuses. However, the returns upon maturity are guaranteed. As compared to participating endowment policies, the risk is obviously lower. A good example would be Tiq 3-Year Endowment Plan.
While there are many mid to long term endowment plans with maturity periods between 10 to 25 years, short term endowment plans of 2 to 6 years are pretty common and tend to get fully subscribed quickly. As its name suggests, Tiq 3-Year Endowment Plan provides a short maturity period of only 3 years, so you can get your guaranteed returns sooner and achieve your financial goals earlier!
You may like this:
- The Ultimate Guide to Endowment Plans
- Endowment Plan: 3 Important Things You Need to Know Before Buying
Are endowment plans safe?
With Singapore’s core inflation last recorded at 3.6% in May 2022 (highest in more than 13 years), it is wise to look for financial tools that can help you to better grow your money rather than keeping it in your piggy bank since it means your money is losing value.
F.Y.I. Some savings account interest rates go as low as 0.05% per year, not to mention the service charge if your account doesn’t meet the minimum average daily balance. That doesn’t seem like a financially sustainable idea either.
For those looking for a lower risk financial tool with higher returns, a non-participating endowment policy may be suitable since returns are guaranteed. Endowment plans are generally easy to understand, hence their popularity. This should also give you an idea of how ‘safe’ it can be.
What to look out for?
It pays to take note of certain marketing and technical terms. If in doubt, don’t hesitate to ask for more details until you have a full understanding of what you are getting into. Here are some important factors regarding endowment plans to note:
Maturity returns: Guaranteed or not?
The maturity returns / interest rates determine the amount that you will receive once your policy matures. Note that the higher the rates, the higher your returns will be.
However, you must be mindful of the term “Up to” as that typically means returns are not guaranteed. There’s usually a fine print if the words “Up to” are used. Check the fine print. On the other hand, some endowment plans such as Tiq 3-Year Endowment Plan offer guaranteed returns upon maturity.
Maturity returns: Per annum or ‘over the years’?
The higher the rates, the higher your returns will be… right? Well, don’t just look at the figures. Look closely to ensure that the rates you are looking at is for per annum. The presentation of endowment plans varies across different insurers. Sometimes, endowment plans offer maturity benefits “over an X number of years” instead of per annum. When presented in this way, the figure will look higher at first glance.
Let’s take the Tiq 3-Year Endowment Plan as an example. It currently boasts the highest guaranteed maturity returns in town* at 2.3% per annum. If you decide to subscribe and grow your wealth now with a single premium of S$50,000, you shall get a guaranteed maturity benefit of S$53,530 (107.1%^ of single premium) when your policy matures in 3 years’ time.
The guaranteed maturity benefit of 107.1%^ (rounded to the nearest 1 decimal place) of the single premium over 3 years is based on the guaranteed yield at maturity of 2.3% per annum. It also takes into consideration compound interest, hence the higher figure.
While it may look more attractive to show the maturity benefits that one can get over the years (in total), we value transparency and clarity here at Tiq by Etiqa. #WYSIWYG It’s just so much clearer and easier to show the maturity return rates on a per year basis.
Duration of endowment plan: short / mid / long term?
Inflation is everywhere. Just look at the increasing home loan interest rates offered by local banks in recent months. The possibility of a global recession in the next two years further increases the incentive of having a fixed rate savings. A lock-in period may not be such a bad thing after all.
Depending on your financial situation, a short term endowment plan that offers guaranteed returns can help to protect your money value, as well as grow it to help you faster reach your financial goals. This can also be part of your portfolio diversification. When deciding between a short term or long term plan , it boils down to opportunity costs.
An endowment plan with a 2-year maturity period means a shorter lock-in period for your money, so you can put it to use once it reaches maturity. That works well if you have a financial goal to meet in two years. However, if you don’t have need for this money yet, it means you have to look for an alternative financial tool that can grow your money. No guarantee that the rates will be equally attractive.
A 3-year endowment plan promises an additional year of guaranteed maturity returns at an attractive rate, which you may not get in a couple of years. Remember the year 2019 just before COVID-19 struck? The then-attractive interest rates declined sharply during the pandemic in the last two years, but for those who have secured an attractive fixed-rate savings, the lock-in must have been reassuring.
Mid term to long term plans typically mature between 10 to 25 years. If you are saving for your children’s education or retirement, this could be an option.
#JustSaying You can protect and grow your hard earned money with Tiq 3-Year Endowment Plan for the next three years.
Tiq 3-Year Endowment Plan (Limited Tranche)
First launched in 2020, this endowment plan from Tiq by Etiqa is no stranger to many Singaporeans. Currently on its 5th tranche, Tiq 3-Year Endowment Plan is a single premium, non-participating life insurance savings plan with the highest guaranteed maturity returns at 2.3% per annum in town!*
You can start saving from S$10,000 to S$1,000,000. This plan has a policy term of 3 years. A lump sum guaranteed maturity benefit will be paid at the end of the policy term. It also includes COVID-19 related Financial Assistance Benefits and life protection of 101% of the single premium, in case a policyholder passes away unexpectedly. Learn more here.
Reviews of Tiq 3-Year Endowment Plan
Here are what some of our customers have said about the Tiq 3-Year Endowment Plan. You can read more here.
Ready to grow your money?
Most endowment plans are offered on a limited tranche – meaning that it has limited availability and they tend to be fully subscribed within a short period of time. Still unsure if an endowment plan is suitable for you? Read this.
On the other hand, if Tiq 3-Year Endowment Plan fits your financial portfolio, don’t wait too long to get it! You can also earn a referral fee of S$50 if you refer a new friend successfully. More details here.
*Compared to similar online single premium 3-year endowment plans available for subscription, as at 12 June 2022. This comparison does not include information on all similar products. Etiqa Insurance does not guarantee that all aspects of the products have been illustrated. You may wish to conduct your own comparison for products that are listed in www.comparefirst.sg.
^The total guaranteed maturity returns (rounded to 1 decimal place) is based on the guaranteed yield at maturity of 2.3% p.a., which will be paid at the end of the 3-year policy term, provided that the insured survives, with no policy alterations or claims made during the entire policy term.
Information is accurate as at 7 July 2022. This policy is underwritten by Etiqa Insurance Pte. Ltd. (Company Reg. No. 201331905K). Protected up to specified limits by SDIC.
As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid. You should seek advice from a financial adviser before deciding to purchase the policy. If you choose not to seek advice, you should consider if the policy is suitable for you. This content is for reference only and is not a contract of insurance. Full details of the policy terms and conditions can be found in the policy contract. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Tiq by Etiqa Insurance Pte. Ltd.
A digital insurance channel that embraces changes to provide simple and convenient protection, Tiq’s mission is to make insurance transparent and accessible, inspiring you today to be prepared for life’s surprises and inevitabilities, while empowering you to “Live Unlimited” and take control of your tomorrow.
With a shared vision to change the paradigm of insurance and reshape customer experience, Etiqa created the strong foundation for Tiq. Because life never stops changing, Etiqa never stops progressing. A licensed life and general insurance company registered in the Republic of Singapore and regulated by the Monetary Authority of Singapore, Etiqa is governed by the Insurance Act and has been providing insurance solutions since 1961. It is 69% owned by Maybank, Southeast Asia’s fourth largest banking group, with more than 22 million customers in 20 countries; and 31% owned by Ageas, an international insurance group with 33 million customers across 16 countries.
Discover the full range of Tiq online insurance plans here.