By MoneyBees
Turn the premiums and maturity values on your child's endowment plan illustration into a yearly return (IRR), then compare it with SSB, T-bills, the 2.5% CPF rate and an index fund.
Use the internal rate of return. It is the yearly rate that makes your premiums, paid on their dates, grow into the maturity value. Dividing the payout by the premiums overstates the return, because the early premiums are invested for longer than the late ones.
They are the two illustration rates for participating plans. LIA Singapore caps the higher one at 4.25% and the lower one at 3.00% a year for Singapore dollar plans, since 1 July 2021. They are not guaranteed and they are not what you earn, because costs come out first.
It depends on the plan, the term and what you value. This page shows the numbers side by side. A 6-month T-bill gives your money back in six months, while ending an endowment plan early usually costs you. Some plans add insurance cover that bonds do not have.
2.5% is the legislated minimum on the CPF Ordinary Account and the rate on your child's PSEA. It is a useful line for a government-backed return. You cannot put plan premiums into your child's CPF, so treat it as a benchmark only.
From MAS auction and issue results, updated when the site rebuilds. The SSB figure is the 10-year average return of the latest issue. The T-bill figure is the latest 6-month cut-off yield.
No. It models premiums at the start of each year and one payout at maturity. For plans that pay out in stages, the result will not match the illustration's own yield figure.
This page does not recommend any plan or insurer. Use it to check the return in your illustration, and speak to a licensed adviser about your own needs.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).