Tuesday, November 14, 2017

Where To Put Your Money To Save For Better Returns?

Interest rates are so low in our bank accounts that it virtually earns close to zero interest. Gone are the days where we see higher interest in the bank account where it was once as high as  9.5% as offered by POSB in the 1980s. Now, there are other higher interest/savings account which offers 1%-3% interest but there are various criteria to meet such as paying bills, buying investment products and meeting the minimum credit card spend.

During my school days, someone approached me to do a survey and subsequently told me of a higher interest product which is known as an endowment plan. Being young that time, I was convinced that this was the better option than just putting my money in the bank account. Little did I know after 10 years, the plan is not even halfway through as it takes 25 years to mature.

I'm sure many of us have bought into similar plans in one way or another and still paying for it after many years. It seems like it’s never ending.

Saving for life goals. The Shorter Way.

While there are many savings plan out there which many people put their money in to achieve certain savings goals and at the same time compound it, 25-year term for most endowment plans is too long for short term goals such as marriage, buying a house or even saving for a child's education.

There are other guaranteed returns investment tools such as the Singapore Savings Bonds (SSB) which are capital guaranteed and pay out a fixed rate coupon to us. However, it can be hard to plan for our savings with this as we need to buy and sell the bonds and there will always be the desire to sell it for a profit. Nevertheless, it is a safe and guaranteed low risk investment option.

Apart from the SSB, I recently found out a new savings plan by the Maybank Group's Etiqa Insurance which provides relative short term plans with guaranteed interest rates. The shortest term is 6 years with 2.02% p.a. guaranteed return. They also have longer term plans which offer higher interest. The good thing about it is that it is capital guaranteed so no matter what, you will get your initial savings back and will not lose a single cent. At this point, maybe some of you may have questions on how does it work, is it risky and does it seem too good to be true? I went on to probe further and got more information as much as possible.

Before we go deeper into the details, let's take a look at the 2 plans which are offered:

eEasy Save - Guaranteed 2.02% pa for 6 years

This is the simplest of all plans which pays out guaranteed 112% upon maturity after 6 years. We only need to pay for the premiums for 2 years though. There is also death protection of 105% of total premium paid throughout policy term and additional accidental death protection at 100% of premiums paid throughout premium term.

There are other similar plans such as the one from FWD insurance which also gives 2.02% p.a. Even though the term is shorter at 3 years, it is important to note that FWD’s credit rating is BAA3 which is lower than Etiqa’s A- rating.

eEasy Savepro - Capital guaranteed and up to 4.02% pa

This seems like an enhanced version of the eEASY save with higher interest for those who want to grow their money further. To get 4.02% p,a,, we will have to go for the 15-year plan. The capital is still guaranteed for eEASY savepro plan so we are assured that we will not lose our money. The lowest is still the 6-year plan which gives 2.65% p.a., slightly higher than the eEASY save although interest is projected. The same death protection and additional accidental death protection apply.

For a summary and more details of the plans, you can refer to their websit.

Who is Etiqa?

Before putting our money into any place, it is important that we know more about the company. Some of us may know Etiqa when we buy our fire insurance for our HDB flats. They are the (only) HDB-approved Fire Insurer and have been protecting more than 300,000 homes since 2009. They also have competitive travel insurance which some of you may have bought before. Their travel insurance even has automatic flight delay notification which will send us a sms text if our flight is delayed and once we qualify for a claim, it will also be automatically be processed without the hassle of making the claims ourselves. Etiqa is 69% owned by Maybank and AGEAS, a multinational insurance company, and is regulated by MAS.

In view of the above, Etiqa is credible and is a safe place to put our money. Let's take a look at some of the life goals we can save up for.

 Life Goal 1 - Saving for Wedding

Getting married requires some savings to begin with. Maybe you're in your 20s and thinking of getting married in the near future. A 6-year savings plan can come in handy with guaranteed return and guaranteed capital. Maybe we can look at eEASY save’s $45,000, 6 year plan which will pay out a guaranteed $50,404 at maturity.

Here's the benefit illustration which I managed to get from Etiqa:

It's that simple, just pay the premiums for 2 years and get 2.02% p.a. guaranteed return on your money in 6 years’ time. The premiums will be $30,000 for first year and $15,000 (half of first year premium) for second year. It may be quite hard though if you do not have that much savings in the first place. If you have some savings already, it will be good to park it somewhere to use for your marriage later. At the same time, you can earn some guaranteed interest on your money.

Some may say the returns are quite low which I agree to a certain extent. However, I will think it is good to save our money which is critical for future use. This will be a good financial planning consideration where our money is assured to be safe and is not left in the bank earning close to no interest. A normal savings account only earn us about 0.05% interest which is exceptionally low.

Life Goal 2 - Saving For Child's Education

Another important life goal is saving for your child's education. Some of us may have bought endowment plans for this purpose as well. However, we will realise by now that endowment plans are not capital guaranteed and the investment returns are not high too.

Many times, we will be locking our money for 25 years and getting only about 3% projected returns. I've checked Etiqa's eEASY savepro 15-year plan, which we can get 4.02% p.a.. The investment return is projected only but your capital will be guaranteed.

Looking at the $50,000 plan, here's the benefit illustration:

This can be slightly complicated so let me summarise. For the plan, we will pay $5,000 every year for 10 years. The plan will mature at the end of 15 years. The maturity yield is listed on their website as 4.02% p.a. which is a projected value. The maturity value is the amount we see under the "projected at 4.75% investment return", S$76,091. 4.75% investment return here refers to the investment return on the participating fund while 4.02% p.a. is the projected return to the customer.  The maturity value is also calculated using compound interest of the projected 4.02% p.a. interest.

They have other plans with policy terms of 6, 7, 9, 11, 13 and 15 years and premium sizes of $5,000, $10,000, $30,000, $50,000, $80,000 and $100,000. It is quite flexible to plan for our life goals with some certainty that we will not lose our money.

How are returns generated?

By now, some of us may be concerned of whether the plans can deliver its projected returns. This applies for the eEASY savepro plan. I managed to get some information on Etiqa’s overall participating fund's asset mix where 65.6% is invested in bonds, 21.4% in equities, 11.3% in cash & deposits and 1.7% in loans and others. While eEASY savepro is part of this participating fund, this asset mix is not representative of eEASY savepro’s specific portfolio as premiums paid are pooled with those of other participating policies offered by Etiqa.

The top 5 equity holdings is in OCBC (12%), DBS (10.6%), UOB (10.1%), Singtel (5.8%) and Keppel Corporation (4%). For bonds, the top few are the Singapore Government bond, Australia & New Zealand bank bonds and also Dai-ichi Life. In 2016, the fund generated a return of 3.97%.  

Guaranteed savings for life goals

I am still a firm believer in investing my own money but at the same time a portion of it should also be in a safe place for any future goals. Better returns with capital protection is a safe way to save for our life goals. We do not want to end up losing money and jeopardising our future and the future of the people around us.

Currently, for eEASY savepro, they are giving out vouchers based on 1.5%  of the 1st year premium size, and up to $1,500 worth of Takashimaya vouchers. While, for eEASY save, the deal involves up to $1,300 worth of Takashimaya vouchers which will increase the interest rate to 2.18% p.a. from 2.02% p.a. instantly.. Each of these deals are limited to 5 coupons per day. Just head over to their website to grab the coupons.

If you like to take a closer look at the plans above, you can refer to their website . The good thing is you can do everything online and get immediate approval so it saves the time and hassle of meeting an agent and possibly overbuying on plans which you do not really need.

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This article is written in collaboration with Etiqa Insurance. All ideas portrayed are independent by SG Young Investment. 


  1. It's hard to come by well-informed people in this particular topic, but you seem like you know what you're talking about!

  2. Very well written article SGYI! By the way same for me I signed up for the endowment plan too in my early years. Mind sharing did you eventually surrender your policy or are you still planning to pay the premium till it matures.

    1. Hi Birdie,

      Yes I'm still paying for my endownment which only matures 10+ years later. Its just a small amount so i treat it as part of my savings. Would he pointless to surrender now as can't get back much