Is endowment plan a good way to save money?

Hi Anon,

Great to hear that you are saving up!

Endowment plans are a good option if you have spare funds to put aside for a period of time. They typically come in the form of a single premium endowment plan, where you commit an upfront amount which will be returned to you, together with interest amounts earned if any, at the end of the pre-determined period. The commitment amount doesn’t have to be of an extremely large sum and the duration can also be relatively short-term.

Take for example Great Eastern’s GREAT SP Series 3. It’s a short 3-year single premium endowment plan with 1.55% p.a. guaranteed returns upon maturity. Minimum premium is $10,000 and payment can be made via Cash (including PayNow, AXS, Bank Transfer), Cheque or via your SRS account.

You may read more from Seedly at https://blog.seedly.sg/great-eastern-great-sp-e.... This plan is offered only for a limited time so hurry!​​​

For saving money, there are options in the market. It depends on personal risk appetite, some would prefer higher risk options like ETFs, Bonds and etc. Whereas some, are risk averse and would prefer to go with FD or endowment plans. So it is really subject to personal preference. There is no right or wrong answer per say, as each individual have different considerations.

Base on current environment, with low interest rates from banks. If one were to choose a guaranteed return plus higher rates than FD. Endowment plan would be a good option.

Do take note, there are long and short term endowment plans in the market.

Short term endowment plan such as 1 to 3 years pro of it is that it offer flexibility, as term is short after it end you get your benefits and capital. For 2 to 3 years term the beauty of it, is that you don't have to keep looking for new endowment plan every year.

Saw an article by Seedly, and I felt author gave a pretty good write up that summarise his view

https://blog.seedly.sg/great-eastern-great-sp-e...

Hope this helps!​​​

Hi anon,

I'm going to take the word 'save' at face value; i.e you aren't looking to invest (or you would have asked that already).

When we say that an endowment is good (or bad), then it must be better or worse than something else. In this context, I would benchmark endowments against FDs, as they are both capital guaranteed, and I do see many people renewing their FDs for many years.

If you don't have discipline, then endowments can be better than just leaving money in the bank, or transferring part of your salary from one account to another one to save up.

However, you do sacrifice liquidity, as opposed to a FD. So examine what you are saving for, and also ask yourself: are you ok to have little to no access to the funds for 10 years or more?

This is typically the case when you are saving up for a time bound commitment down the road. Examples of this can be children's education or your own retirement at a defined age. In this case, endowments give you the upside potential of the market (since the premiums are invested in a typical 60/40 bond equity split) with the downside protection of a capital guarantee (for most plans, some plans are not capital guaranteed, so you do have to examine the numbers carefully). FDs don't have the capability to do that.

Nowadays, there are also endowment plans with no defined maturity date, so once you are done saving, the plan will continue to compound and you are free to access the value in the plan (part or all) at any time (typically, the break even comes in around 15 years from the start of the plan). This is better than FD in the long run, but you need to get past the stage of saving up first.

So if monies are planned to be saved over a long time without a need to access it, and you still want to maintain the same level of zero risk, then endowments are a decent alternative to FDs.

Usually endownment plan or any other plan underlying are various unit trust. Why not just learn how to select unit trust yourself, instead of other people select for you. Higher return. Sometime, the saleperson who sell you the plan are oblige to select the fund from their organisation "fund library"

Unit trust Is more liquid, more flexibility. Local brokerage transaction usually 0%

When u risk appetite increase u can just switch your $$$ to ETF. Using the same brokerage account.