Singapore Savings Bonds vs Endowment Plans

Financial advisers/insurance agents almost always recommend you to purchase an endowment plan. But have you heard of Singapore Savings Bonds?

Let’s compare between the two options:

1. Singapore Savings Bonds is FULLY liquid throughout its tenure, while Endowment Plans are not.

For Singapore Savings Bonds (SSB), you’re able to take out anytime shall an emergency need arises. For whatever reason. However, for an endowment plan, your money is being locked inside there until the maturity date. If you choose to surrender the endowment plan early, the amount that you are able to withdraw will ALMOST ALWAYS be lesser than how much you’ve put in, unless you’re nearing the maturity date.

2. Singapore Savings Bonds’ GUARANTEED yield is HIGHER than Endowment Plans.

SSB Returns (Taken from SSB website):
SSBYield.jpg
Let’s assume that we put $10,000 annually for 5 years and hold the bond for 10 years, in order to compare fairly with a 10-year endowment plan.
EDIT (28/10/2018,11: 15 AM): Table has been updated:

Singapore Savings Bonds Returns
Singapore Savings Bonds Returns

SSB Gives $59,671.00 after 10 years, fully guaranteed.

Endowment Plan Returns (Taken from www.comparefirst.sg) :

EndowmentPlanComparisons

MyWealthPlan, which offers the best-guaranteed amount of $54,500 and the best total guaranteed and non-guaranteed amount gives $64,224. (based on a 4.75% investment return of their participating fund)
The next question is, are these companies able to really achieve 4.75%?
Let’s look at the track record across all companies. (This was the latest file available on StraitsTimes, which is only until the year 2016.)
301217_bizchinsurers30
As you can see from this diagram, there is some potential for these companies to achieve above 4.75%.

3. Singapore Savings Bonds’ returns are FULLY guaranteed, while Endowment Plans’ are not.

Ask yourself this question, are you risk averse, or are you moderately aggressive, or are you an adventurous investor? SSB is able to fully guarantee the returns, while for Endowment Plans, it is PARTIALLY GUARANTEED and PARTIALLY NOT GUARANTEED.

So then, what’s the downside of SSB?

1. The government ensures that every individual can only have up to $100,000 worth of Singapore Savings Bond.

There is a restriction for SSB, which is you’re only allowed to place up to $100,000 per individual. This is probably a restriction set by the government to control how much one is able to utilize SSB, otherwise, everyone and their moms will just place their money in SSB, and banks and financial institutions will probably go bust.

2. You need to have a minimum of $500 for each bond, while Endowment Plans usually can go as low as $125 for a 10-year Endowment Policy.

This really isn’t an issue though as you could just save $125 monthly for 4 months, and you could then deposit the $500 every 4 months. That way, you’re still technically saving $125 every month.

Conclusion:
It depends on whether you are willing to stomach the risk of being able to obtain a potentially higher return and the lack of liquidity.

If that’s the case, endowment plan could be suitable for you. Otherwise, SSB is a safer option.

Also, if you are risk-averse and once you have maxed out your $100,000 amount that you are allowed to place in SSB, you could then start using endowment plans to grow your wealth.

Are you a financial adviser/insurance agent yourself? Do you offer an endowment plan with a higher GUARANTEED return?
What are your opinions?
Comment below.

What do you think?

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