Why insurance annuity plan returns seems to be better than insurance endowment plan?

Biggest difference is the time vested. Annuity plan typically lasts for many decades whereas endowment plan lasts from 5-25 years. :)

Hi anon,

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The time horizon for annuity plans can stretch till the life assured is age 120.

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With that kind of time horizon, the underlying assets in the par fund can be deployed into longer horizon instruments, which can deliver higher returns. For example, 50 year bonds (MAS just launched one) have a yield higher than a 10 year bonds in general.

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Endowment plans typically last for up to 25 years. It may come as a surprise but even a 25 year horizon is not nearly long enough for some of the instruments in the market to provide maximum returns (e.g. 30 year SGS bonds).

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If you compare a lifelong endowment and a lifelong annuity, you will start to see that their returns converge to almost the same figures, given the same timeframe and insurer.

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Thus, beyond having more time to grow your money, it is also about what underlying assets can be bought, if the time horizon is longer.

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Hope that clarifies.