Where To Park Your Reserved Funds Now?
Updated on 18 Nov 2020 to include the changes to include removal of referral benefits from SingLife.
Interest rates have been on a low since the COVID-19 pandemic. While this is good news for mortgage re-financing, for the rest of us who are used to parking our money in the bank; be it in a bank “multiplier” account or fixed deposit, we’ve seen rates drop over the past few months. Even those short term Single Premium endowment plans are affected as well.
Traditional single premium endowment policies, where you put in a lump sum into a policy, and after the specified number of years, the policy “matured” and give you back the maturity amount, which may include both guaranteed and/or non-guaranteed benefit. Recently, there are some new products that were launched with interesting features that are particularly useful for us, especially during the time where we may need high liquidity. I’ve handpicked 3 policies which I personally feel, are real short term alternatives for you to park your reserved funds in:
1) Singlife Account [Returns adjusted to 2% for the 1st $10,000]
Etiqa eSave Advance [Plan is withdrawing on 30 Sep 2020]
3) Etiqa Enrich Harvest
The Singlife Account is neither a bank savings account nor a fixed deposit. It is an insurance savings plan, that comes with a debit card that allows you to utilise your cash for everyday use. Unlike other traditional endowment policies, bank savings account or fixed deposit where you may earn more interest when you deposit more, the Singlife Account works somewhat the opposite.
The policy comes in 3 tiers:
- 1st S$10,000 earns you 2% per annum non-guaranteed returns (crediting rate).
- Above S$10,000 to S$100,000, returns are reduced to 1% per annum non-guaranteed returns.
- Beyond S$100,000, there are no returns.
Returns are calculated daily and will be credited on the first day of the following month. You get to request for a debit card for your account and you can make a withdrawal any time you like. S$500 is all you need to get started and you will need to maintain a minimum account value of S$100. We are all only entitled to one account per person.
If you are wondering why anyone would put in more than S$100,000 if there are no returns beyond it, one reason that I can think of, could be its cover for death or terminal illness, up to 105% of your account value. It is also good to know that the Singlife Account is protected up to specified limits by the Singapore Deposit Insurance Corporation.
To find out more:-
1) On your mobile phone, click here.
2) You are required to download the App to apply and start your account going.
3) Once you have applied successfully, you’ll have to activate your debit card to receive a S$10 bonus to your account. As this is a referral link, after your S$10 bonus is credited to your account, I will also receive a S$10 appreciation bonus as well. When you are signed on, you can also send your friends and family your unique link and you and your friends can receive the extra bonus as well.
Etiqa Enrich Harvest
If you have a slightly longer time frame and is looking for a product where you can split the single lump sum into 2 premium term, here comes Enrich Harvest by Etiqa, that gives a guaranteed crediting rate of 2.68% for the first 6 years. The premium term for this policy is 2 years, and you can choose to save between S$30,000 to S$200,000 yearly for 2 years. There is a 3% discount on the first year premium when you make an upfront payment of 2 years.
For any withdrawal during the 1st 6 years of the policy however, there is a surrender charge based on a percentage of the account value. This percentage decreases from 80% on the 1st year to 0.1% on the 6th year. From the 7th year onwards, you can then make partial withdrawal anytime you like in multiples of S$500 without charges. The crediting rate from the 7th year onwards is non-guaranteed and based on the prevailing market rates, with full capital guaranteed.
It is good to also know that during the 1st 6 years of the policy, there is a one-time free withdrawal benefit of up to 50% of the total regular premiums paid or S$50,000 whichever is lower, if you or your spouse is certified by a Doctor to:
a) be physically or mentally incapacitated from ever continuing in any employment;
b) have a severely impaired life expectancy;
c) lack capacity within the meaning of Section 4 of the Mental Capacity Act (MCA) and the lack of capacity is likely to be permanent; or
d) be diagnosed with Terminal illness
The account value will be reduced whenever there is a withdrawal made. There is also a death benefit of 101% of the account value.
Here you go! I hope these alternatives can help you out in these difficult moments. Is there an undisputable best plan out there? Absolutely not! But there is definitely a best plan for you, given your unique situation. To understand more about which plan suits you, hook me up for a chat and we can explore which one suits you best, given your scenario.
Disclaimer: Information written is to my best knowledge as per the date posted and has no legal rights. It represents my personal opinion, which may be different from yours, and that’s totally cool. It is important to read the policy contract and documents for the full terms and conditions. This post does not constitute a recommendation. Please seek professional advice before committing to a plan as it is a long term commitment.