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 like the Singlife Account, Etiqa’s Gigantiq and Dash EasyEarn 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 Etiqa Gigantiq vs Dash EasyEarn: Which is best?
|Insurance savings plan||Singlife Account||Etiqa Gigantiq||Dash EasyEarn|
|Returns (p.a.)||2% (non-guaranteed)||1.8% (1% guaranteed + 0.8% bonus)||1.8% (1.5% guaranteed + 0.3% bonus)|
|Withdrawal fee||None||$0.50 (DBS/POSB account) or $0.70 (PayNow)||None (Dash e-wallet) or $0.70 (PayNow)|
There are currently 3 main contenders to the insurance savings plan throne: the Singlife Account, Etiqa’s Gigantiq, and Singtel Dash’s EasyEarn.
All 3 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 3 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.
But each plan is subtly different from the rest of the pack, so we’ll dive into the 3 options below.
1. Singlife Account
Anyone with $500 can set up a Singlife Account, with the minimum account balance being just $100.
The company offers up to 2% returns on your first $10,000, and 1% from your first $10,000 up to $100,000. These returns aren’t guaranteed, but Singlife does offers a capital guarantee. That means you won’t lose the money you’ve put in.
Until 28 Feb 2021, they’re also offering bonus interest of 0.5% if you spend at least $500 using your Singlife debit card every month.
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 even give you a debit card so you can spend directly from your account.
2. Etiqa’s Gigantiq
Etiqa’s Gigantiq claims that you can receive up to 1.8% on your first $10,000 during your first year, with 1% being guaranteed interest. The remaining 0.8% interest is considered bonus interest and will be depend on how the investments are doing.
After the first year, only your capital will be guaranteed.
Gigantiq has an extremely tiny 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 Gigantiq, download the Tiq by Etiqa app on your Apple or Android phone and sign up for an account on the app. Once your account has been approved, you can transfer money electronically into your account.
Gigantiq lets you top up your account and withdraw cash at any time, so you can use it as a regular bank account if you wish. However there is a $0.50 (DBS/POSB account credit) or $0.70 fee (PayNow) every time you withdraw cash.
3. Singtel Dash EasyEarn
Not content with remaining in the telco business, Singtel now offers their own insurance savings plan in the form of Singtel Dash EasyEarn.
The plan offers the chance to earn up to 1.8% returns in your first year, with 1.5% being guaranteed. After your first year, only your capital will be guaranteed, but with any luck the economy will have started bouncing back and the projected returns will improve.
Of the 3 plans on this list, EasyEarn requires the highest minimum investment of $2,000. But on the bright side, they also enable you to earn their projected interest on a higher amount, namely $20,000.
You can either pay a lump sum of $20,000 at the start of your plan, or you start with $2,000 and then top up your account with $500 every month.
The account 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.
You also need to maintain your policy’s minimum balance of $2,000. Otherwise, you stop earning returns.
Verdict: Which insurance savings plan is best?
Of the 3 plans above, Singlife Account currently offers the highest interest rates, with the chance to earn a bonus 0.5% interest by the end of February next year if you spend enough on their card each month.
The Singlife Account is also the most flexible among the contenders, as they don’t charge any withdrawal fees. However, you need to accept that they don’t offer guaranteed returns.
If you want that kind of assurance, Singtel Dash EasyEarn offers the highest guaranteed returns, with 1.5% of their 1.8% projected interest rate being guaranteed in your first year. But it does have the highest minimum balance to maintain.
On the other hand, if you’re very strapped for cash, Etiqa Gigantiq has the lowest initial deposit and minimum account balance to maintain, so it’s the lowest-commitment one.
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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