Good stocks to invest – Does your Insurance Saving Plans (Endowment) give you 3 to 5% returns?



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Insurance companies says that you can achieve higher savings returns from endowment, that it is a long term savings strategy. Are they as what they touted to be?

Insurance savings plans or Endowment plans are plans designed by insurance companies with an objective to provide and meet long term saving goals.

The assured (in this case you, or someone) pays the insurance company a fixed sum of money monthly, quarterly or yearly, or a one time amount.

The insurance company will:

Return you a sum of money upon maturity, which could be 15, 20 or 30 years. This is getting less common. Most insurance savings plans are more flexible.


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Some endowment plans are designed to pay out after certain duration. (see above graphics as example)

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An annual cash flow insurance endowment plan

Some endowment plans after the first few years will pay out an annual cash flow to the assured (see above graphics as example)

I am always fascinated about the returns of endowments.

They are sold to us as a great instrument to meet certain long term saving goals such as children’s University tuition fees, retirement.

The illustrations by the insurance agents and company often tout that their insurance saving plans yield 3 to 5% returns.

As a data driven person, I wonder if the reality of the returns is close to this.

If they are close to this range of returns then they are decent saving products. They are doing what they are being touted.

However, if they do not then the majority of the savers are being sold a hope.

I grew skeptical when two of my acquaintances told me their saving endowment yields them a low amount in return.

Two Examples of Supposed Low Insurance Savings Endowment Returns

One of my acquaintance is a project manager.

He said that his endowment from Great Eastern is losing money since he bought the savings policy in 1993 and matured in 2013 (20 years).  I took a look and  it turns out he is not losing money.

But the annualized return is 0.9%.

I was taken a back by that figure. I thought I have not factoring in some cash back.

Another reader then shared with me her policy bought during the period.  Her calculation was that it yields here roughly 1%.

It should be noted that this reader of mine was rather well verse in finance so I wasn’t expecting any mistake when she say the returns were low.

I was astounded with the returns shared with me.

Endowment primarily invests in fixed income or bonds and for the majority the rates have been falling which means values are going up.

Also in this period you could possibly still invest in 10 to 15 year duration bonds yielding 3 to 4%.

This kind of return has to be a mistake. Indeed, upon re-evaluating, the returns aren’t THAT bad as far as 1%. It is how we derive the returns. If we take it as a lump sum return, it looks bad, but the premiums are paid over 10 to 18 years, so the calculation of returns is different

Reader’s Policy 1

My reader is kind enough to provide the following:

  • Name:  Manulife
  • Start Year: 2002
  • End Year: 2007
  • Duration: 5 Years
  • Premium Paid: $10000 lump sum premium
  • End Value: $11700
  • The returns you get: 3.2%
  • Does the plan have any cash back or return: No cash back

Reader’s Policy 2

  • Name:  Manulife
  • Start Year: 2003
  • End Year: 2013
  • Duration: 10 Years
  • Premium Paid: $6000 annual. Total 60,000
  • End Value: $68,000
  • The returns you get: 2.76%
  • Does the plan have any cash back or return: No cash back

The returns from these 2 savings plans are not high but also not as low as they described. The returns are close to the corporate bond of safer blue chip companies.

A Family Member’s Great Eastern Policy

Here is an endowment bought by a family member:

  • Name: Golden Lion Endowment
  • Start Year: 1991
  • End Year: 2009
  • Duration: 18 Years
  • Premium Paid: $1244 annual for the endowment portion.Total for 18 years $22392. Rider and permanent disability another $356 more
  • End Value: Roughly $29000
  • The returns you get: 2.96%
  • Does the plan have any cash back or return: Yes. But they are reinvested back. (Yr 3 1.5k, Yr 6 1.5k, Yr 9 3k, Yr 12 3k, Yr 15 3k)

It is strange that whether it is 5 years, 10 years or 18 years, the returns per year based on XIRR we get are quite similar (3.2%, 2.76% and 2.96%). I would expect the returns for a longer duration savings endowment to be higher.

Our Problem: We do not have enough data on returns of endowment saving plans out there

The problem for most of us is that the actual returns that policy holders get are not readily available.

Insurance companies only revealed the returns of their participating policies.

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However, that is not the returns the policy holders enjoyed. You still have to deduct distribution costs from these investment returns.

If the returns are around 3 to 5%, I like it.

Not that I like it for myself but for a group of wealth builders who:

  1. Are very risk adverse about losing money
  2. Does not want to be bother about taking up the investing responsibilities
  3. Is OK to lock in their money for an extended duration
  4. Earns very well at his job and able to put away more money than most of us

For this group of wealth builders, if you can give them such a return, its not too bad.

The problem is that non-guaranteed returns projection is very, non-guaranteed.

Let’s Crowdsource Insurance Saving Returns and Work Together

I am reaching out to you.  We would like to consolidate a data bank of past matured endowment returns so that, we,  the wealth builders, can be better informed.

You can comment below or email me at wealthmentor@investmentmoats.com and tell me your thoughts of past endowments you bought, or friends,  parents or acquaintance bought.

Do provide the following :

  • Name of policy
  • Start year
  • End year
  • Duration
  • Premium paid (whether it is monthly, quarterly and  yearly)
  • What is the end value
  • The returns you get
  • Does the plan have any cash back or return
  • If there are cash back how much is it

I am looking forward to hear from you. Let’s make this a project for you and me.

Reader’s Contribution of their Matured or Soon to Matured Insurance Endowment Savings Policies

From this point on, you can check out the name of the insurance endowment, and its return over the duration contributed by readers from the first time round.

If you contribute, I will add them below.

If you see a spreadsheet table showing an XIRR. That is my standard of measuring the return of an insurance endowment over the period.

Think of XIRR as a methodology of computing the various cash inflow and outflow between you and the insurance plan such that we derive the annual interest rate of this insurance policy.

The following is a contribution from a Facebook reader. He is a rather shrewd investor so its not likely he will missed out much details. But this policy that he provided takes the cake. I don’t think we missed out much but this happens to be a money losing endowment!:

  • Name:  Great Eastern S-Lion
  • Start Year: 1996
  • End Year: 2011
  • Duration: 15 Years
  • Premium Paid: $739.60 annually
  • End Value: $5155.92
  • The returns you get: -11.65% CAGR
  • Does the plan have any cash back or return: No cash back

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A contribution from a Reader: The $5818 maturity value is similar to the guaranteed + non-guaranteed value on the policy Benefit Illustration. TM does live up to its reputation of meeting bonus forecasts.

  • Name:  TM Asia EnRICH Plan
  • Start Year: 2008
  • End Year: 2013
  • Duration: 5 Years
  • Premium Paid: $5000 lump sum at start
  • End Value: $5818
  • The returns you get: 3.08% CAGR
  • Does the plan have any cash back or return: No cash back

This is a Facebook Reader with his father’s 20 year Endowment which just matured this year!

  • Name:  Manulife
  • Start Year: 1994
  • End Year: 2014
  • Duration: 20 Years
  • Premium Paid: $2062 annually
  • End Value: $56,000
  • The returns you get: 3.11% CAGR
  • Does the plan have any cash back or return: No cash back

An email reader sends in an AIA endowment:

  • Name:  AIA
  • Start Year: 1996
  • End Year: 2014
  • Duration: 18 Years
  • Premium Paid: $1226 annually
  • End Value: $29,135
  • The returns you get: 3.17% CAGR
  • Does the plan have any cash back or return: No cash back

A reader send in his 21 year AIA endowment with 2 years left to mature. The current surrender value is $45,000 From my calculation, which I hope to get it right, it seem to just break even! But the projected final amount will be around $60,000.

  • Name:  AIA
  • Start Year: 1995
  • End Year: 2014
  • Duration: 19 Years
  • Premium Paid: $3,600 annually
  • End Value: $60,000
  • The returns you get: 3.07% CAGR (including 30k cash back)
  • Does the plan have any cash back or return: $5k cash back every 3 years, total30k

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A reader send in his mum’s recently matured Great Eastern Endowment plan.

  • Name:  Great Eastern 20 Year Endowment With Compound Revisionary Bonus
  • Start Year: 1994
  • End Year: 2014
  • Duration: 20 Years
  • Premium Paid: $1,081 annually
  • End Value: $27,127 received
  • The returns you get: 2.72% CAGR
  • Does the plan have any cash back or return: 3 withdrawals in 1999,2005,2010

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The reader then provided me with another of his mum’s 9 year NTUC policy. The returns are good!:

  • Name:  NTUC Living Policy
  • Start Year: 2005
  • End Year: 2014
  • Duration: 9 Years
  • Premium Paid: $9,000 lump sum with CPF OA
  • End Value: $12,865 received
  • The returns you get: 4.05% CAGR
  • Does the plan have any cash back or return: No

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This reader sent in a 20 year NTUC policy. I am starting to think NTUC have the most lucrative historical policies.

  • Name:  NTUC Income Anticipation
  • Start Year: 1992
  • End Year: 2011
  • Duration: 20 Years
  • Premium Paid: $661 per year
  • End Value: $19,173 received + $2,000 received at 3rd and 6th year (the rest of cash back reinvested)
  • The returns you get: 5.35% CAGR
  • Does the plan have any cash back or return: A $1k cash back every 3 years, first 2 years cash taken the next 4 reinvested

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2015 July 08: A reader was kind enough to let us share 2 of his 25 year old endowment policies. These policies have matured.

  • Name: Great Eastern Lion Endowment Plan
  • Start Year: 1990
  • End Year: 2015
  • Duration: 25 Years
  • Premium Paid: $533.70 a year (sum assured $10,000) and $98.60 a year Living Assurance Rider
  • End Value: $14,842 received + $5,000 received at 5th,10th,15th and 20th year
  • The returns you get: 3.84% CAGR
  • Does the plan have any cash back or return: A $1k cash back every 5 years, last year $2k

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  • Name: NTUC Special Endowment Plan
  • Start Year: 1987
  • End Year: 2012
  • Duration: 25 Years
  • Premium Paid: $576.00 a year
  • End Value: $22,403 received
  • The returns you get: 3.25% CAGR
  • Does the plan have any cash back or return: NA

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