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I am unable to take advantage of high-interest saving accounts that require salary crediting or high credit card spending as I am unemployed. This resulted in me looking for alternatives to park my cash for some returns.
When I was still working, I parked some cash in SSBs in 2018/19 when their rates were still relatively high (10-year average interest above 2%). The rates nowadays are really low due to the low interest rate environment. The redemption of SSBs can take up to 1 month so I didn’t want to put all my money there. I am using SSB to keep a part of my investment war chest so the time needed to deploy my funds is important. I still had some cash available so I needed an avenue to earn some yield.
Emergence Of Insurance Savings Plans
They have been on the market for about two years and I only really looked at them last year. The insurance saving plans are basically an insurance product that has no lock-in period.
Unlike traditional products, these plans do not penalize you for withdrawing cash any time you like. They work like a bank account but the difference is that they place limits on balances earning interest, withdrawal limits and provide insurance coverage.
Protected By PPF, SDIC
These insurance savings plans are covered by the Policy Owners’ Protection Scheme (PPF). I am not sure why the abbreviation is different lol. This scheme is there to protect policy owners up to a certain limit if an insurance company, which is a member of the PPF Scheme, fails.
The scheme that we are more familiar with is the Deposit Insurance Scheme(DI), or more commonly referred to and known as SDIC. This protects our funds in banks for up to S$75,000 per bank if the bank fails.
We can think of SIDC being the insurance provider of insurance companies and banks.
According to SDIC, the limits for a claim per person per insurer for the PPF Scheme are as follows
- S$100,000 for aggregated guaranteed surrender value
- ELI5 – The cash value of the policy
- S$500,000 for aggregated guaranteed sum assured
- ELI5 – The insurance payout portion of the policy
Using Singlife, we will take a look at a few examples. The amounts used are for illustrative purposes as it will not make sense to place more than S$100,000 in Singlife as no interest will be earned plus the amount above that is not covered by PPF.
Example 1 – S$50,000 deposited in Singlife Account
If Singlife fails, PPF Scheme will pay out the full S$50,000
Example 2 – S$105,000 deposited in Singlife Account
If Singlife fails, PPF Scheme will only pay out S$100,000 as it is the limit for the cash value of the policy. S$5,000 is forfeited
Example 3 – S$2,000,000 deposited in Singlife Account and you die/suffer from a terminal illness
When you die or suffer from a terminal illness, you will be paid the cash value plus 5% cash value as the death benefit. According to Singlife’s terms, the death benefit is limited to S$50,000. The limit of the insurance portion is protected up to S$500,000 by PPF but it is limited to S$50,000 by Singlife.
If Singlife fails, PPF scheme will only payout S$150,000.
- S$100,000 is the limit of the cash value to be paid
- S$50,000 is the limit of the death benefit to be paid
PPF Is Not Ominpotent
Even if our money is protected by the PPF Scheme, we cannot be sure how long the payout will take as there is no precedent that we can refer to. The PPF Scheme kicks in when MAS gives the winding-up order and it can take up to 30 days for the funds to be paid out to holders. A long time can also lapse between withdrawal problems and the company receiving the winding-up order.
If you can afford to do so, don’t place all your eggs in one basket. Spread your funds and assets across different trustworthy providers. Getting the most returns out of your funds should not be your only consideration. The safety of your funds should also be taken into account. You don’t want all your funds to be stuck in one company even if eventually you will get reimbursed by the PPF Scheme.
Comparison Between Insurance Saving Plans
We will look at the two existing insurance saving plans, Singlife Account and Dash PET. The two other major plans are Gigantiq and Dash EasyEarn but both of them are not currently accepting new users.
|Product||Singlife Account||Dash PET|
|Minimum Initial Funding||S$500||S$50|
|Minimum Top Up||FAST – S$0.01||PayNow/Dash Wallet – S$1
eNets – S$50
|Minimum Earning Balance||S$100||S$50|
|Maximum Earning Balance||S$100,000||S$30,000|
|Base Interest Rate||First 10k – 1%
Next 90k – 0.5%
Above 100k – 0%
|First 10k – 1.3%
Above 10k – 0.3%
Above 30k – NA
|Bonus Interest Rate
|0.5% – spend >=S$500 on Singlife Card
0.5% – Singlife Grow @ min. S$1,000
|0.2% – sign up for complimentary one-year protection
0.75% – 0.25% per paid add-on for up to 3 policies
|Max Potential Interest Rate
|1% + 0.5% + 0.5%||1.3% + 0.2% (1st yr) + 0.75%|
|Withdrawal Fees||FAST – Free||Dash Wallet – Free
PayNow – S$0.70 / tx
|Withdrawal Limits||S$20k daily||S$200k a year|
|Spending Option||Singlife Visa Card||Dash Wallet|
These terms can and will change as market conditions evolve etc. We have seen banks and insurance saving plans slash interest rates these few years.
Also take note that Dash PET, Dash EasyEarn and Gigantiq are all underwritten by Etiqa Insurance Pte. Ltd. Remember that the PPF limits are for each insurer so the limits for Dash PET, Dash EasyEarn and Gigantiq are all limited to one insurer.
Minimum Initial Funding
The minimum initial funding required to open an account with Singlife is S$500.
The minimum initial funding required to open an account with Dash PET is S$50.
Minimum Top Up
You can top up your Singlife account using FAST/GIRO without any minimum amount e.g. S$0.01. FAST is recommended as it is almost immediate while non-FAST options (including and not limited to GIRO) can take up to 7 working days.
The bank account that you are making the top up with also has to be in the same name as the name registered with Singlife.
You can top up Dash PET using PayNow or Dash Wallet with a minimum of S$1 while if you use e-NETS, there is a minimum of S$50. Top-ups also have to be made in multiples of S$1.
Minimum Earning Balance
The minimum balance to continue earning interest is S$100. There is no penalty for falling below the minimum balance. If you fall below S$100 for a continuous 60 days, they will give you another 60 days to top up to S$100. They reserve the right to close your account if you do not have S$100 by the end of 120 days.
The minimum balance to continue earning interest is S$50. There is no penalty for falling below the minimum balance. However, if you would like to withdraw all your funds, you will need to close the account.
Maximum Earning Balance
Any amount above S$100,000 does not earn any interest.
You can only have a maximum S$30,000 balance in your Dash PET account. Any interest earned for the month will not be included in the S$30,000 threshold. So even if you have the full S$30,000 in your account, you can still earn interest on the first S$30,000.
Base Interest Rate
For the first S$10,000, you can earn 1% interest.
Next S$90,000, you can earn 0.5% interest.
For amounts above S$100,000, there is no interest.
For the first S$10,000, you can earn 1.3% interest.
Next S$20.000, you can earn 0.3% interest.
For amounts above S$30,000, there is no interest.
Bonus Interest Rate
If you spend S$500 or more on the Singlife Visa card, you can earn an additional 0.5% on the first S$10,000 in Singlife Account. This promotion currently only lasts till 31 December 2021.
If you participate in Singlife’s Grow (minimum S$1,000), you can earn an additional 0.5% on the first S$10,000 in Singlife Account. You need to be holding this product for at least 30 days on the interest crediting date before being eligible for the bonus. This promotion currently only lasts till 31 December 2021.
If you activate the free additional insurance, you can earn an additional 0.2% on the first S$10,000 in Dash PET. This free insurance lasts only 1 year and will lapse after that. It will not be automatically renewed.
If you purchase a protection plan with Dash PET, you will earn an additional 0.25% per plan on the first S$10,000 in Dash PET. You can buy all 3 available protection plans to get a maximum of 0.75%. Premiums for each plan starts from S$0.02 a day.
Maximum Potential Interest Rate
If you fulfil all the various conditions, the maximum interest rate you can make on the first S$10,000 balance is 2%.
- 1% base interest
- 0.5% from spending S$500 monthly on Singlife Visa card
- 0.5% from purchasing a Singlife Grow product
If you fulfil all the various conditions, the maximum interest rate you can make on the first S$10,000 balance is 2.25% for the first year. It will drop to 2.05% in the next year.
- 1.3% base interest
- 0.2% for the first year from signing up for the complimentary coverage
- 0.75% from signing up for 3 protection plans (0.25% per plan)
You can withdraw your funds via FAST for free.
You can withdraw your funds via the Dash wallet for free or via PayNow for S$0.70 per transaction.
There is a limit of S$20,000 a day.
There are no daily limits but there is a limit of S$200,000 a year. Although the maximum account balance is S$30,000, there are still implications as it is cumulative. This should not affect most users as it will take multiple withdrawals and deposits before hitting the cap.
You can directly spend from your Singlife account via the physical Singlife Visa card. There is also the option to lock the card in the Singlife app to prevent any accidental spending or theft. When I first applied for the card, it didn’t come with the locking feature so I just left my card in the envelope in my drawer since May 2021. I only activated it after researching for this article.
You can withdraw your funds to your Dash wallet and spend from there. You can either scan via QR code or tap via NFC. It seems that the feature to lock your card is unavailable.
Why Not Use Cash Management Accounts?
These cash management accounts from Endowus, Stashaway or Syfe have high interest rates above 1%. The underlying assets when you place money in these accounts are cash funds, money market funds and bond funds. Although they feel like a bank account, they are actually an investment product and not covered by SDIC.
When everything is fine, these assets are typically safe as they are classified as low risk assets. However, in times of crisis, there is a chance that the asset prices will drop, affecting your balances in these cash management accounts. Take note that your account balances are tied to the assets behind the cash management accounts. This means that not only your yield is not guaranteed, but your capital is also not guaranteed.
My investment warchest is to be deployed during times of crisis. If the value of my funds in these accounts will be affected during market crashes, it defeats the purpose of placing my investment warchest in them. I need my warchest to be at its full value when it is time to deploy.
Why Not Use High-Interest Bank Accounts?
First, the interest rates of these accounts have been dropping. Also, some of us are unable to meet the various criteria like salary and credit card spending. The insurance savings plans have high base interest without having to meet any criteria.
Looking Closer At The Terms
As I always encourage looking through the terms, here are some of them that we should take note of.
Interest Rates Are “Not Guaranteed”
It might sound worrying but it just means that insurance saving plans have the discretion to change the interest rate anytime. As there is no lock-in period, if the conditions are better elsewhere, we can just withdraw our funds to greener pastures.
The capital is however guaranteed and not subject to market fluctuations. The exception is when the market fluctuates so greatly until the insurance company close shop, then your funds are only guaranteed up to the limits by PPF (S$100k per person per insurer).
Try to limit your funds and assets in each organization to be below the limit of SDIC to minimize the consequences of default.
Potential Withdrawal Delays Up To 6 Months
This appeared in the terms of Dash PET. When there is a surge of withdrawals, they reserve the right to delay the withdrawal by up to 6 months. Although understandable, seeing this makes me worried about my funds if I place them with Dash PET.
As for Singlife, there are no such terms so I asked their support regarding this. They said that during abnormal situations, they will let us know if our withdrawals are affected and attempt to solve them asap.
Both providers seem to be potentially affected in times of mass withdrawals so we should not place our entire warchest in these accounts.
Market Value Adjustments
This is another term that appeared in the terms of Dash PET. They will also monitor the account value and exercise Market Value Adjustment (MVA) at their discretion in times of market fluctuations and high withdrawals. The MVA will only affect the non-guaranteed component, the capital is guaranteed up to the limits of PPF.
I have checked with their support and they said that as Dash PET does not have any non-guaranteed portion, this clause does not affect the Dash PET product.
There are withdrawal limits for both Singlife Account and Dash PET. There is a limit of S$20,000 a day for Singlife Account while there is an annual limit of S$200,000 cumulatively for Dash PET. You have to take note of the limits so that you won’t be caught off guard when you need to withdraw your funds.
I currently only have an account with Singlife and I don’t plan on opening an account with Dash PET at the moment due to the lack of available funds. The 6 month potential delay is a bit worrying to me but at least they stated it in their terms. I was quite worried about the MVA portion for Dash PET at the start but after doing my research, this clause does not affect the product. I can’t recommend Dash PET as I have no experience using it but both accounts should be safe and good to go as far as I can see.
If you can afford to, distribute your assets over multiple providers to reduce the risk during market volatility. My investment warchest is split between SSB, Singlife Account and my personal DBS account. I have to admit I am not getting the most yield out of my funds as a portion of it is earning 0.05% is DBS but I need to be able to deploy my funds on the get-go without any questions in times of crisis. The interest forgone is not too significant in the grand scheme of things.
Referral Code – ymnB0qgw
If you are looking for a place for your cash to earn some yield without having to jump over multiple hurdles, you might want to take a look at Singlife Account.
Get up to S$35 when you sign up for a Singlife Account (affiliate link), the insurance savings plan + Singlife Visa Debit Card and Grow, the investment-linked policy.
To qualify for the rewards, you can do the following.
- Sign up & fund the Singlife Account (minimum S$500) + activate the Singlife Visa Debit Card.
We both get S$5 credited to our accounts
- Sign up for your FIRST Grow policy (optional)
We both get S$30 credited to our accounts
Use my link (affiliate link) or invite code ymnB0qgw to get rewards when you sign up.
If you are looking for an avenue to earn some yield without jumping through multiple hoops, Singlife Account can be one of your considerations. The funds in Singlife Account is guaranteed by PPF, SDIC up to certain limits. Although capital is guaranteed, try not to place all your funds in insurance savings accounts as there might be delays in withdrawals in times of high market volatility. We should cultivate the habit of looking at the terms as much as possible before signing up for anything.
Do reach out if you know of any other places to park our investment warchest funds.
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