Life is inherently unpredictable, and at any given moment, unforeseen circumstances can drastically alter our lives. Ensuring the financial security of oneself and loved ones in the face of such uncertainties is a paramount concern for every individual.
Endowment plans emerge as an ideal solution for those seeking financial stability and support for future investments. Here are some informative statistics concerning endowment plans in Singapore:
- In the year 2022, the total sum of new endowment plan premiums in Singapore amounted to an impressive S$14.5 billion.
- On average, individuals in Singapore pay an annual premium of approximately S$10,000 for their endowment plans.
- The typical maturity period for an endowment plan in Singapore spans around 15 years.
- Endowment plans in Singapore offer an average guaranteed return of 3.5% per annum.
- Additionally, these plans provide an average non-guaranteed return of approximately 5% per annum.
- Surprisingly, it’s noteworthy that roughly 60% of endowment plans in Singapore are surrendered before reaching maturity.
- The primary reasons for such surrenders often include financial hardship, evolving financial priorities, and dissatisfaction with the returns.
Current Trends in Endowment Plans
Endowment plans in Singapore have undergone significant changes over the years, adapting to the evolving financial needs and preferences of consumers. These plans, which combine both investment and insurance components, have long been popular for individuals seeking a balance between life coverage and savings growth. However, as consumer behaviors shift and new financial products emerge, endowment plans are being evaluated against other options, and the market is seeing a transformation in the types of endowment products available.
One of the key trends in recent years has been the rise of short-term endowment plans. Unlike traditional long-term plans, which often require commitments of 10 to 25 years, short-term plans typically mature within 2 to 6 years. These plans have become increasingly attractive to consumers who are looking for quicker returns on their investments. The appeal of short-term plans lies in their ability to offer faster financial liquidity, making them a popular choice for those who may not wish to commit their funds for extended periods.
At the same time, consumers are becoming more investment-savvy and are increasingly comparing endowment plans with Investment-Linked Plans (ILPs). While endowment plans offer guaranteed returns and life coverage, ILPs provide the potential for higher returns through investments in the market, although they come with greater risk. As a result, some individuals are shifting their preferences toward ILPs, attracted by the growth potential and flexibility they offer. This shift in consumer preferences reflects a growing interest in more dynamic financial products that can better respond to market changes and economic conditions.
In addition to these changes in product preferences, there has been a noticeable rise in financial literacy initiatives in Singapore. More consumers are becoming educated about their financial options, leading them to view endowment plans not just as insurance products, but as disciplined savings tools that can help mitigate inflation risks and provide financial security. This growing awareness is enabling individuals to make more informed decisions when considering endowment plans as part of their financial planning.
However, despite the increased awareness and accessibility of financial products, some individuals are questioning the value of endowment plans, especially given their relatively low yields compared to alternative investment avenues such as stocks or real estate. The opportunity cost of locking funds into these plans for long durations, particularly when other investments might offer higher returns, is a concern for some policyholders. As a result, endowment plans are being reevaluated as part of a broader financial strategy that encompasses a wider range of investment options.
In light of these changing preferences, financial advisors are increasingly recommending that endowment plans be integrated into more comprehensive financial strategies. This holistic approach focuses not only on insurance needs but also on retirement planning, emergency funds, and wealth accumulation. By aligning endowment plans with broader financial goals, individuals can better manage their financial future, ensuring that these products meet their specific needs and complement their overall wealth-building strategies.
Considerations Before Purchasing an Endowment Plan
Endowment plans encompass a disciplined approach to creating a robust financial safety net. These plans effectively serve as a retirement account that matures over a specified period, catering to various financial needs.
Additionally, they offer a life cover that secures the future expected savings for the family in the unfortunate event of the policyholder’s unexpected demise. We’re here to walk you through five key aspects you should be aware of before considering the purchase of an endowment plan.
Survival Benefits with Endowment Plans
One distinctive feature of endowment policies is that they guarantee the payment of a sum assured to the policyholder if they survive the duration of the contract. In the unfortunate event of the policyholder’s demise during the term, the nominees are entitled to receive the sum assured along with any additional incentives.
Enhanced Dividends
Endowment plans typically offer better returns compared to conventional life insurance or term insurance plans. This is due to the inclusion of extra premiums and the additional incentives provided by the plan.
Flexible-Premium Payment Frequency
Insurers offering endowment policies often provide flexible premium payment terms. Policyholders can choose a premium payment frequency that suits their convenience, whether it’s monthly, bi-annual, annual, or a one-time lump sum payment.
Flexibility of Cover
Endowment plans offer flexibility in terms of coverage. Policyholders have the option to purchase additional incentives or riders, such as partial or total disability riders, critical illness riders, accidental death riders, and more. While these riders affect the payable premiums, they enhance the scope of coverage.
Income Tax Benefits
Endowment plans come with tax advantages. Premiums paid and key benefits, such as the sum assured and maturity income, are eligible for tax exemption under Sections ATC and 10D of the Income Tax Act, 1961.
Endowment Plans in Singapore
AIA Guaranteed Protect Plus III is a comprehensive whole life insurance plan with an endowment policy component, offered by AIA. This plan provides coverage for death, total and permanent disability (up to age 70), and critical illness (optional, up to age 100). Additionally, it offers an add-on option of 2X, 3X, or 5X multiplier (up to age 65 or 75) to enhance your lump-sum payout, ensuring financial support for your children or other dependents. Non-guaranteed bonuses are also included, contingent upon the performance of the funds your premiums are invested in.
AXA SavvySaver (II), tailored for younger generations, is a flexible endowment plan designed to provide guaranteed cash payouts along with coverage for death and terminal illness up to 24 years old. With four endowment policy plans to choose from—15, 18, 21, or 24 years—you’ll receive an annual guaranteed cash payout of up to 5.50% of the sum assured starting from the second policy year until the year before your policy matures. Optional riders are available to enhance protection and lower premiums in the event of disability or certain critical illnesses.
China Taiping I-Secure stands out as the only whole life insurance cum endowment plan in the market offering a guaranteed lifetime benefit of up to 4 times your basic sum assured for death and critical illnesses. This option is particularly suitable for younger individuals and offers premium payment terms of 5, 10, 15, 20, or 25 years. Optional riders cover up to 161 medical conditions, with some providing waivers in case your spouse is diagnosed with a terminal illness, total permanent disability, or passes away.
Income’s Gro Power Saver is renowned for its limited pay period feature, offering a 10-year endowment plan where premiums are paid only for the first three years of the policy with Premium Privilege. In the event of death or terminal illness, policyholders are entitled to receive 105% of all net premiums paid and 100% of bonuses.
Manulife Goal 10 is a two-year, single premium endowment plan providing a potential return of 3.54%. This plan guarantees the return of 100% of the capital upon policy maturity and offers coverage against death at 101% of the single premium. Additionally, policyholders receive a guaranteed return of 3.39% upon policy maturity.
When contemplating an endowment plan in Singapore, it’s vital to consider the following factors:
- Endowment plans fall within the realm of insurance products, thus incurring associated fees and charges.
- It’s important to note that returns from endowment plans are not assured and can vary in accordance with market fluctuations.
- Endowment plans may not align with the financial goals of everyone. If you prioritize a secure and guaranteed savings method, an endowment plan might not be your optimal choice.
It’s essential to recognize that endowment plans offer attractive returns and insurance coverage when viewed as long-term investments. However, choosing the right policy requires careful consideration of personal needs, risk tolerance, current financial circumstances, and future requirements. If you are deliberating on an endowment plan, seeking advice from a financial advisor is crucial. Their personalized guidance can facilitate your understanding of the diverse endowment plan options available and assist you in selecting the one that best suits your specific needs.
Disclaimer
Every effort has been made to ensure the accuracy of the information provided, but no liability will be accepted for any loss or inconvenience caused by errors or omissions. The information and opinions presented are offered in good faith and based on sources considered reliable; however, no guarantees are made regarding their accuracy, completeness, or correctness. The author and publisher bear no responsibility for any losses or expenses arising from investment decisions made by the reader.
