There is no best endowment plan in Singapore that anyone can name in advance. Part of every participating plan’s payout is non-guaranteed, plans are launched and withdrawn constantly, and the projected figures rest on assumed rates that are capped by industry rules, not earned. What you can do is read the benefit illustration properly and compare the guaranteed numbers.
That is why this page ranks nothing. It teaches the one document that matters.
What an Endowment Plan Is
MoneySense says endowment products are often marketed as savings plans to meet a specific financial goal. Part of the premium pays for insurance cover. The rest is invested and subject to risk, so you may not get back what you put in.
Two kinds exist.
- Participating (“par”). The policy shares in the profits of the insurer’s participating fund, paid as bonuses. Bonuses are not guaranteed.
- Non-participating. Maturity and cash values are guaranteed. There are no bonuses.
They are not deposits. A fixed deposit can be broken with loss of interest; an endowment surrendered early can return less than you paid in.
How to Read a Benefit Illustration
The benefit illustration (also called a policy illustration) is the table of projected values that comes with the proposal. It is personalised to your age, premium and term.
| Part of the illustration | What it tells you | What to check |
|---|---|---|
| Total premiums paid to date | Your running outlay | The total at maturity |
| Guaranteed surrender value | What the insurer must pay if you stop that year | The year it first exceeds premiums paid |
| Guaranteed maturity value | What the insurer must pay at the end | Whether it is above or below total premiums |
| Non-guaranteed values, lower rate | Projection at the lower illustrated rate | Use this as your planning case, not a promise |
| Non-guaranteed values, upper rate | Projection at the upper illustrated rate | Treat as optimistic |
| Death benefit | What is paid if the insured dies | Usually modest for savings-focused plans |
| Distribution cost | What the insurer expects to pay to distribute the policy | How much of early premiums goes to costs |
Layouts differ between insurers. Ask the person presenting it to point to each of these lines.
Guaranteed Versus Non-Guaranteed
The guaranteed columns are contractual. The non-guaranteed columns depend on bonuses.
MoneySense explains that reversionary bonuses, once declared, form part of the guaranteed benefits. Terminal bonuses are worked out only at maturity, claim or surrender, and may be small or zero if the fund is weak then. Insurers smooth bonuses from year to year and can cut future bonuses.
The Two Projected Rates
A benefit illustration projects the non-guaranteed values at two rates. For Singapore dollar participating policies, the Life Insurance Association caps the upper illustration rate at 4.25% a year, with the lower rate at least 1.25 percentage points below it, giving a cap of 3.00%. The current caps took effect on 1 July 2021 and are reviewed yearly.
Three points are easy to miss.
- The rates are the assumed investment return of the participating fund as a whole. They are not your return.
- LIA states they are purely illustrative and are not upper and lower limits of the fund’s performance. Actual returns may be higher or lower.
- An insurer may not illustrate above its own best estimate, or above the cap.
Your own return is the yield implied by what you pay and what you get back. That is normally lower than the illustrated rate, because of the cost of insurance and the insurer’s charges.
Surrender Values
Look down the surrender value column year by year. In the early years it is often well below premiums paid, because costs are charged up front. The break-even year is the first year the guaranteed surrender value passes total premiums. Before it, leaving means a certain loss.
A Worked Illustration
An illustrative plan, with made-up round numbers: S$5,000 a year for 10 years, maturing at the end of year 15. Total premiums: $50,000.
- Guaranteed maturity value: $52,000.
- Projected maturity value at the lower rate: $60,000.
- Projected maturity value at the upper rate: $66,000.
- Guaranteed surrender value after year 3: $9,000, against $15,000 paid.
Working out the yield. The premiums are in the plan for about 10.5 years on average (paid over years 1 to 10, returned at year 15).
- Guaranteed: $52,000 on $50,000 is roughly 0.4% a year.
- Lower projection: roughly 1.7% a year.
- Upper projection: roughly 2.7% a year.
So a table headed “4.25%” translates here to about 2.7% a year to the policyholder, and only if the fund delivers. Stop after year 3 and you lose $6,000.
These figures are invented to show the method. They are not a real product, a forecast or a guarantee. Ask for the yield at maturity on any real illustration.
The short version: In a benefit illustration, the guaranteed columns are promises and the rest are projections at assumed fund returns capped at 3.00% and 4.25%. Your own yield is lower than those rates. Find the guaranteed maturity value and the break-even year before anything else.
Finding the Best Endowment Plan for You: A Fair Comparison
- Same premium, same term. A 10-year and a 20-year plan cannot be compared on maturity value alone.
- Guaranteed yield first. Rank your shortlist by guaranteed maturity value over total premiums.
- Then the lower-rate projection. If a plan only looks good at the upper rate, note that.
- Check the product summary for the participating fund’s investment mix. MoneySense says it shows the fund’s strategy and broad asset mix.
- Use compareFIRST to see endowment plans from different insurers on one profile.
- Compare with the guaranteed alternatives over the same period: Singapore Savings Bonds, T-bills and fixed deposits, and CPF’s guaranteed interest rates. MoneySense’s advice is to compare returns, features and risks against other products.
After you buy a participating policy, the insurer sends an Annual Bonus Update on the fund’s performance and bonuses declared. You can also request an updated illustration.
Who an Endowment Plan May Not Suit
- Anyone who may need the money before maturity.
- Anyone without an emergency fund. MoneySense’s guide suggests three to six months of expenses first.
- Anyone buying it for insurance. The cover is small for the premium; MoneySense advises thinking twice about an endowment for savings alone if you do not need the cover. See whole life vs term insurance.
- Anyone who has not yet covered basic protection. Check with the protection gap calculator.
If an insurer fails, SDIC’s Policy Owners’ Protection Scheme protects guaranteed benefits of life policies: up to $500,000 of guaranteed sum assured and $100,000 of guaranteed surrender value per life assured per insurer, according to MoneySense. Non-guaranteed bonuses are not covered.
What To Do Next
- Ask for the benefit illustration and product summary before any discussion of “returns”.
- Write down four numbers: total premiums, guaranteed maturity value, lower-rate maturity value, and the break-even year.
- Ask for the yield at maturity under the guaranteed and lower-rate cases.
- Score the proposal with the recommendation scorecard, and use the 14-day free-look period if you have second thoughts.
