It’s no secret that savings account and fixed deposit interest rates in Singapore are dismal. So, it’s no surprise that non-bank “accounts” from insurers like Singlife and Etiqa are becoming more and more popular.
Known as insurance savings plans, these are a relatively new type of financial product that behave a bit like bank accounts, but offer the promise of better growth potential for your hard-earned cash.
Are they too good to be true? Here’s a guide to insurance savings plans in Singapore, and how to choose the right plan for you.
What are insurance savings plans?
Insurance savings plans are not the same as savings accounts or fixed deposits, though they seem very similar to the user.
Basically, you credit money into the account, and the cash will be used by the insurer to invest and, hopefully, grow your money. Returns are paid out and credited directly to your account on a regular basis (just like interest).
They’re also relatively liquid compared to, say, your typical endowment plan. You can top up or withdraw from your plan without penalty.
But it’s not called insurance for nothing. The plan is managed by an insurer, not a bank, and the 2 financial institutions are regulated differently by MAS.
Furthermore, when you sign up for a plan, you will receive some life insurance coverage. The amount of coverage is usually similar to how much money you have in the account though, so unless you’re pumping in hundreds of thousands of dollars you’re not going to get the same kind of coverage as you would with an actual life insurance plan.
All right, so which insurance savings plan is appropriate for your needs and what should you know before you open one?
Singlife Account vs Singtel Dash PET: Which is best?
|Insurance savings plan||Singlife Account||Singtel Dash PET|
|Returns (up to $10,000)||1.5% p.a. (non-guaranteed)||1.7% p.a. (1% guaranteed + 0.7% bonus)|
|Returns (>$10,000)||1% p.a. (non-guaranteed)||1.2% p.a. (1% guaranteed + 0.2% bonus)|
Sign-ups for Etiqa’s Gigantiq and Singtel Dash’s EasyEarn are now closed. Currently, the two contenders to the insurance savings plan throne are the Singlife Account and Singtel Dash PET.
All these insurance savings plans have the following features:
- Low barrier to entry: You don’t need millions to maintain an account. The initial deposit can be as low as $50.
- Capital guaranteed: These plans guarantee that you won’t lose your initial capital.
- No lock-in period: Enter and exit the plan whenever you want, and withdraw money whenever you like. Just don’t let your balance fall below the minimum to receive interest.
- (Small) death benefit: You have some life insurance protection, which means your family gets a cash payout if you die.
So which should you pick? We’ll dive into the two options below.
Anyone with $500 can set up a Singlife Account, with the minimum account balance being just $100. Here’s what you get:
- 1.5% p.a. returns on your first $10,000
- 1% p.a. on account balance >$10,000 up to $100,000
- Promo: 0.5% p.a. bonus interest if you spend at least $500 on your Singlife debit card every month, valid until 30 Jun 2021
These returns aren’t guaranteed, but Singlife does offer a capital guarantee. That means you won’t lose the money you’ve put in.
In order to sign up for an account, you just need to download the Singlife app on your Apple or Android phone, create an account with your SingPass and then select a policy. Once your policy has been approved, you can transfer money to your account via FAST.
Everything is done through the app. Withdrawals can be made whenever you want through the app using FAST. There are no withdrawal fees, and they also give you a debit card so you can spend directly from your account.
Note: All new sign-ups will be placed on a waiting list for now, with no announced end date yet.
Singtel Dash PET
Not content with remaining in the telco business, Singtel now offers their own insurance savings plan in the form of Singtel Dash PET. You earn:
- 1.7% p.a. returns on your first $10,000
- 1.2% p.a. on account balance >$10,000 up to $30,000
- Of the above returns, only 1% is guaranteed, while the remainder (0.7% or 0.2%) is bonus
These returns are only for the first year. After the first year, only your capital will be guaranteed.
Singtel Dash PET has a small initial deposit requirement of just $50 and a minimum account balance of $50, which is great for students or those who are just dipping their toes into this whole personal finance thing.
To sign up for Dash PET, download the Singtel Dash app on your phone and sign up for an account on the app. Once your account has been approved, you can fund your PET account via PayNow.
Dash PET enables you to top-up your account and withdraw cash at any time. Withdrawals are free only if you credit it to your Singtel Dash e-wallet, otherwise you need to pay a $0.70 fee per transaction.
Verdict: Which insurance savings plan is best?
Of the current insurance savings plans, Singtel Dash PET is better:
- Higher crediting rate of 1.7% p.a. for the first $10,000 (vs 1.5% for Singlife)
- Guaranteed returns of 1% (vs no guaranteed returns for Singlife)
- Lower initial deposit of $50 (vs Singlife’s $500)
- Lower minimum account balance of $50 (vs Singlife’s $100)
However, note that Dash PET requires you to pay $0.70 for every cash withdrawal by PayNow. So we wouldn’t use this as an everyday spending account. Also note that the Dash PET account cap is $30,000, lower than Singlife’s $100,000.
The Singlife Account is weaker than Dash PET, but it’s possible to beat PET by diligently spend $500 a month on the Singlife debit card. You’d earn up to 2% p.a. on your first $10,000 — a bit higher than Dash PET.
But bear in mind the returns are not guaranteed, and you’ll also lose out on points/rebates from using a credit card.
Our recommendation? Park your first $10,000 in Singtel Dash PET and don’t touch it until the year is up. If you have more than $10,000 to spare, put the remainder in Singlife.
But before you switch to an insurance savings plan…
In today’s low interest rate environment, insurance savings plans actually offer a decent alternative to traditional savings accounts. Right now, they are rivalling even high interest savings accounts, as they offer higher returns but come with fewer requirements.
That being said, there are a few things you should bear in mind before jumping ship.
Returns may not be guaranteed: Insurance savings plans are different from savings accounts. Some or all of the returns may not be guaranteed. And the returns on these products can get “nerfed” anytime too.
Returns are good for 1 year only: The above crediting rates are for the first year only. After that, who knows how much your returns will be?
Not as liquid as bank accounts: You can’t simply walk to an ATM and withdraw cash immediately if you need it urgently. To withdraw your money, you may need to pay transaction fees, and the transaction may not be instantaneous.
Insurance savings plans do make a good supplement to a savings account where you stash spare cash or spending money. But you should not be relying on insurance savings plans to invest, as the returns are not even good enough to beat inflation.
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