Short-Term Endowment Plans | Endowment Investment Plans in Singapore

Investment

With low-interest rates on savings accounts and fixed deposits, some insurers have offered short-term endowment plans as an alternative option to grow your assets. Mid- to long-term endowment plans, on the other hand, can be a useful tool for saving for key milestones. Endowment plans are traditionally a savings/insurance hybrid product that is recommended as a means to save for your child’s school, your retirement, or some other specified milestone. A fresh crop of short-term endowment plans has just emerged. Rather than needing a decade or more to develop, these endowment plans mature in two to six years. In this blog, we tell you about short-term endowment plans in Singapore. 

Short-Term Endowment Plans

Because of low bank interest rates, even newcomers to finance are becoming interested in short-term endowment products. Short-term endowment plans are a feasible alternative to savings accounts or fixed deposits because of their high yields, short commitment periods, and easy mechanics. Endowment plans, while offered by insurers, are essentially savings programs that help you reach a goal amount at a later date (e.g. your nest egg). After paying the premium, you wait for the funds to mature before withdrawing a higher sum than you put in.

Although this appears to be a straightforward concept, the terminology surrounding endowment plans can be perplexing to individuals who are unfamiliar with insurance. Let’s dissect them. The premium is the amount you pay for (invest in) your endowment plan. It might be a single premium (a one-time lump sum payment) or it can be spread out over several months or years. Short-term endowment plans typically have a single premium.

The length of time it takes for the endowment plan to mature. Conventional plans can last 10 years, 15 years, 20 years, or even up to a certain age (e.g. 75 years old). Short-term endowment plans, on the other hand, have a maturation span of two to six years. If you stop your endowment plan early, you may not receive the guaranteed returns or even your capital.

Maturity benefit: This is the amount of return on your initial investment at the conclusion of the term, expressed as an annual percentage (e.g., 2% p.a.). Some endowment plans exclusively provide guaranteed returns, whereas others may divide returns among guaranteed and non-guaranteed components.

Participating or non-participating: Endowment plans often entail the insurer depositing your premiums into a ‘participating’ fund, which is similar to an investment made on your behalf (although you do not get to select the investment portfolio). If the fund performs well, a participating policy entitles you to a portion of the profits (the non-guaranteed return), but a non-participating policy entitles you to nothing more than the guaranteed return.

Insurance: A tiny amount of the money you invest into an endowment plan is used for insurance. This is fairly minimal for short-term endowment strategies. For example, in the event of death or total permanent disability, you could be insured for 101 percent or 105 percent of the premium paid.

Endowment plans, particularly short-term and/or single premium plans, are not accessible indefinitely. They are instead issued in ‘tranches,’ much like Singapore Savings Bonds. Each tranche has a set number of policies. Tranches with appealing returns close rapidly, and if you miss it, you’ll have to wait for the next one.

Singapore’s Best Short-Term Endowment Plans

If you have a lump sum of money that you want to grow quickly but don’t want to incur the risk of investing it, here are four short-term endowment plans to consider.

GREAT SP Series 6

The Superb SP Series 6, a limited-time offer from Great Eastern, is a short-term endowment plan that promises 1.68 percent annual returns for three years—a great alternative to fixed deposits. The minimum premium is S$10,000. Unlike cash management accounts, which allow you to save smaller sums of money, you’ll need S$10,000 to apply for this Great Eastern endowment plan.

Three years is the policy term. It provides death and total and permanent disability compensation of 105 percent of the premium or the policy’s surrender value, whichever is greater. Maturity benefit: GREAT SP Series 6 is a non-participating endowment plan that provides guaranteed annual returns of 1.68 percent.

Tiq’s Three-Year Endowment Plan 

The Tiq 3-Year Endowment Plan is a single premium, non-participating life insurance savings plan available to anyone between the ages of 17 and 70, regardless of health. What’s the best part? There is no limit on the number of policies you can buy. Singapore residents (NRIC/FIN) and foreigners with a work permit/employment pass/social pass can apply for the Tiq 3-Year Endowment Plan.

The minimum premium is S$10,000. Payments can be made online using your DBS/POSB bank account, PayNow, or FAST transfer. Three years is the policy term. In the event of your death during this time, you are insured for 101 percent of the premium.

Maturity benefit: This short-term endowment plan offers the greatest guaranteed return in the short-term endowment plan class, with a guaranteed return of 1.62 percent p.a. at maturity. If you’re wondering, the maximum premium size is S$1,000,000.

With a guaranteed yield of 1.62 percent every year — a total of 4.9 percent at the end of three years — you will be able to collect a lump payment of S$1,049,391 at the end of three years if you apply for the maximum single premium of S$1,000,000.

NTUC Income Gro Capital Ease 

If you need assistance saving money for a significant purchase, such as a house or a car, the NTUC Income Gro Capital Ease offers assured returns. The minimum premium is S$5,000. You can pay in cash via PayNow QR, e-GIRO (for DBS/POSB customers only), or SRS money. Three years is the policy term. During this period, you are protected from death or total and permanent disability (TPD).

Maturity advantage: At the end of the three years, you will receive a guaranteed maturity benefit of 104.51 percent of the single premium, based on a guaranteed yield at maturity of 1.48 percent p.a.

If you apply for the maximum single premium of S$200,000, you will be eligible for a lump-sum payment of S$209,020 at the end of three years.

Should you invest in Short-Term Endowment Plans?

Endowment plans can be appealing short-term substitutes for savings accounts, fixed deposits, and even Singapore Savings Bonds (SSBs). In today’s climate, the choices for risk-free money growth are severely restricted. Endowment plans safeguard your capital, provide higher returns than banks, and provide some insurance coverage as a bonus.

However, regardless of how short the policy term is, an endowment plan is still a commitment. Only leave cash here that you will not need in the next two or three years. You may lose money if you have to cancel your coverage early. There are other drawbacks to securing your funds. If interest rates climb in the coming years, you may be unable to take advantage of favourable savings or fixed deposit promotions since your money is in the endowment plan.

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