NTUC Income recently released the Gro Capital Ease plan, which is a 2 year endowment plan.
Short term endowment plans are becoming more common, and in the current climate of low interest rates, they do offer an interesting option to park your emergency funds in.
What are short term endowment plans?
These are plans being offered by insurance companies, and you’ll lock up your funds with them for a period of time.
In the past, the lock up period used to be quite long, with a minimum of 5-10 years.
These options are still available, but short term plans are currently being offered as well.
For the Gro Capital Ease, the lock up period is only 2 years.
By locking up your funds with the insurance companies, they would offer you a slightly higher interest rate compared to the banks.
What you’ll need to take note of is that these plans have both a guaranteed and a non-guaranteed yield. Most insurance companies would place the non-guaranteed yield on their ads, which may be a bit misleading.
This non-guaranteed yield is only given out if the investments that the insurance company has performs well. Otherwise, the company will only pay you the guaranteed yield, which may be much lower.
For the Gro Capital Ease, the good thing is that there is only a guaranteed yield of 1.85% p.a.
Since interest is compounded over the 2 years, you would receive 103.73% of the premium that you placed into the plan when it matures.
The 1.85% may look rather low, especially since the previous short term endowment plan offered by NTUC Income (Capital Plus) had a yield of 2.13% p.a.
However, in this current climate, a 1.85% yield is slightly higher than what other banks are offering.
For students like myself, the Standard Chartered JumpStart Account used to be the gold standard at 2%.
Now that the interest rate has dropped to 1%, this plan seems like a good option compared to other alternatives to the JumpStart Account.
What’s more, you’re guaranteed to be accepted into the plan regardless of your health condition!
Besides the 1.85% yield, it has some insurance benefits since it is offered by NTUC Income.
If you encounter death or total permanent disability (TPD) 1 year after the start of the policy, you would receive 105% of the single net premium (if it is within the first year, you would only receive the net single premium).
If NTUC Income gives the payout for either death or TPD, the policy will be terminated with immediate effect.
The minimum premium is $5k, and there are many options that you can transfer the money to NTUC Income, such as eNets, PayNow QR or even your Supplementary Retirement Scheme (SRS) funds.
This makes the plan really accessible for most people since $5k is not too large a sum, compared to the China Taiping i-Save plan which requires a minimum of $30k for the premium.
Previously, I signed up for the Capital Plus plan, and the on-boarding process was really quick. I expect it to be the same for this plan as well.
The main drawback for this plan is the lack of liquidity for these 2 years.
Should you choose to withdraw your money before the policy matures, you may receive less than the initial premium that you paid.
As such, you should consider carefully if you’re able to survive financially without this $5k within these 2 years!
More details on the policy can be found here.
To sum up, here’s a quick comparison of the pros and cons of this plan.
|Low initial premium of $5k||Premium is locked up for 2 years, and may have a penalty if you withdraw early|
|Guaranteed yield of 1.85% p.a., amounting to you receiving 103.73% of your premium when the policy matures||Only the premium is received with no interest in the event of death or TPD during the first year of the policy|
|Fast on-boarding process|
|Flexible payment method using eNets, PayNow QR or SRS|
|Death and TPD benefit of 105% of premium if event happens 1 year after the policy starts|
|Guaranteed acceptance regardless of medical condition|
My advice would be to place your funds in the SingLife account first to maximise the 2.5% on your first $10k, before you consider this plan.
Another option you can consider is Etiqa Elastiq, which has slightly better liquidity as the lock up period is only for 3 months, and the returns are comparable with a 1.8% p.a. guaranteed yield for 3 years.
Ultimately, if you prefer a risk free plan with a short lock up period, the Gro Capital Ease is one strong option that you can consider.
If you have any questions regarding the plan, you can contact me for further clarification!