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Great205: Pros and Cons of Short-Term Endowment Plans & Factors To Consider

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Great Eastern has re-launched their Great205 Endowment plan, and to be honest, it is rather intimidating to wake up to a Facebook feed filled with promotion shoutouts to it by respective insurance agents.

While it is the Financial Advisors’ jobs to sell and maybe educate the consumers, it is our job as consumers to do our very own research.

Correct mentality to adopt for consumers

  • Do not feel pressured to take up certain policy simply because of marketing words such as “limited time only” and “while stocks last”.
  • There is no lack of good financial products around as long as one does his research.
  • Always take note of the fine prints for any policy and investment instrument

Now, assuming we successfully adopt the above mindset, we look at the GREAT205 objectively.

Key features of GREAT205

  • 3-year single premium – consumers will invest a lump sum into the policy which lasts for 3 years
  • Only Great Eastern’s customers can take up this policy
  • The policy pays out an interest of 2.05% every year. This percentage is guaranteed.
  • One can choose to either withdraw the 2.05% interest earned every year or reinvest it into the policy.
  • Minimum investment of S$10,000

 

Quick glance at Great205’s return

 

Short term, moderate returns

According to an article which Seedly wrote a while back, the Great205 falls under the category of short-term endowment plan.

 

For short-term endowment plans, their pros are cons are as such:

Pros

  • Relatively low risk given that they are products of reputable insurance companies
  • No worry about losing principal sum upon maturity
  • Beats inflation with as little as S$1,000 (for Great205, this number will be S$10,000)

Cons

  • Locks up your cash, illiquid

The only possible product which can be of competition to the Great205 in the past will be the FWD Insurance Endowment Plan who will be looking to launch their offer soon too.

The previous time the FWD Insurance Endowment Plan promises a 2.02% per annum for 3 years, slightly lower than the Great205.

Who is this policy for?

  • Investors with low-risk appetite looking to beat yearly inflation (core inflation at an average of 1.9% for the past 10 years)
  • Great Eastern Policy Holders with an extra sum of money which they have no long-term plans for.
  • Definitely a better option than letting your money sit in the bank
  • Probably not for active investors looking for a longer investment horizon

Seedly Personal Finance Community: Investing with Supplementary Retirement Scheme (SRS)

We understand that that Great205 allows consumers to use Supplementary Retirement Scheme (SRS) for it.

  • Terence Lio, a contributor to the Seedly Personal Finance Community states that while people start their SRS to save on tax, such financial products can be seen as a bonus on top of the tax saved.
  • Christopher How also mentioned that while getting the policy in cash makes sense. Using of SRS to invest and not being able to withdraw the money until years later should be a factor to consider.
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