What are endowment plans in Singapore?
Endowment plans in Singapore are investment policies that allow you to invest lump sums of money and receive payments every month until the plan matures. The duration of your endowment plan is usually ten years, but it can be 15 or 20, depending on the company that offers the plan.
You have to pay a premium for these plans every month. Your selected amount will depend on how much you want to put in per month, with most companies offering at least 5% interest per annum. However, if they fail to provide this percentage, they are required by law to give you your entire capital sum when the policy matures. It means that even though you might not get an annualised 5%, your initial capital won’t be lost in the end.
Risk willingness
Before investing in an endowment policy, it’s essential to know what you need and how much risk you’re willing to take. The returns on your endowment will be lower if the company underestimates risk because they can’t reject claims, but they are also less likely to default on their payments. If they overestimate risks, they may charge higher premiums, which means that you’ll lose out on a small amount of money each month. However, this will lower the chances of them failing during the period of your plan.
Retirement
Endowment plans are usually for retirement purposes – meaning that they are not suitable for everyone looking for immediate financial help during emergencies or times of need. Having said this, though, some companies offer endowment plans that will give you a lump sum when the plan matures. Other endowments offer immediate payouts through unit trusts or annuities, but they come with higher premiums and penalties if you wish to access your money before the plant matures.
Use endowment as a compulsory retirement savings
Most countries in Europe use endowment plans as compulsory retirement savings for their citizens, making Singapore one of the only places where such policies are not mandatory. It is why many think that this system is better than forcing people into saving money against their will – with most people not able to afford an additional monthly premium on top of what they already have to pay out for living expenses.
If someone can’t spend their current income properly, putting more away every month may do more damage than good. On the other hand, mandatory policies would allow people to save for their futures without worrying about how to afford them.
Signing up for an endowment plan
If you are interested in signing up for an endowment plan, many platforms offer specific companies and industry news details. For example, if you’re wondering whether Prudential should be your company of choice, reading reviews online will show you first-hand what others have experienced with that brand. It allows you to make informed decisions about which one will work best for your own needs while still guaranteeing the right to choose for yourself.
Ensure they are suitable for you
Endowment plans in Singapore are the best way to invest your money if you want to know that it’s safe and guaranteed, but they aren’t necessarily suited for everyone. Some people take risks with their money because they feel like they may not have enough time to save up later on, while others feel like endowments are required by law regardless of whether or not you need them.
Usually, these policies will work for most people, especially since there is usually no penalty fee even if you wish to cancel your policy at any point before maturity – unless otherwise stated in the contract.
Bottom line
Your capital sum will be paid out when your plan matures regardless of how much can be claimed in monthly payouts, but some endowment plans allow you to get an immediate payout instead. Your monthly income may be lower with these types of plans, but they will give you more flexibility in the long run if it’s essential for you to access your funds at any given time.
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