Confessions of a Spender: Accumulating A Lifetime of Savings – Singapore’s Trending Endowment & Savings Plans
I’m a confessed “Spender”. And before any judgement, there are 4 money personalities:
- Builder: Views money as a tool to transform dreams into reality
- Giver: Believes that money spent on loved ones is the most worthwhile
- Saver: Trusts that money is a form of security
- Spender: Perceives money as a means to happiness
I’m all for living the moment and spending to create memories that last a lifetime. But I’m also a spender who has learnt how to save and invest over time.
My psychology around putting money aside is such that it makes me feel less guilty in my expenditures when I know that I’m earnestly saving money and that my cushioned financial plans are fail-proof.
Today, there is a new class of savings and endowment policies trending in Singapore. Because of their longevity feature, I call these products “Lifetime Savings Plans” (LSPs). Regardless of financial disposition, LSPs are attractive accompaniments to the savings portfolio.
What is Lifetime Savings Plan (LSP)?
A Lifetime Savings Plan allows you to accumulate savings over a pre-determined period of 5, 10, or 15 years. Upon full premium payment, the plan continues to compound the yearly guaranteed and non-guaranteed returns for life (or up to age 120 depending on product specifications).
It has an additional feature that allows you to transfer the plan to your child or spouse, and it can continue over his/her lifetime. Should you require funds any time, you can make a partial withdrawal or fully surrender the plan for a lump sum benefit.
How did Lifetime Savings Plans (LSPs) come about?
Financial planning used to be straightforward, with a general expectation that we graduate in our early 20s, and work for 25 to 30 years before we retire. Jobs were relatively stable, and income growth was gradual yet steady. As such, traditional savings plans had fixed-term maturity of 20 to 25 years to align with the norm. However, the landscape has changed over time:
- Entrepreneurship and retrenchment emerge as drivers for early fund withdrawal.
- Delayed retirement and the rise of future-minded individuals who wish to save beyond generations bring about demand for an extended lifespan of savings plans.
A such, insurers designed LSPs to accommodate these societal behavioral trends.
So now, who’s best suited to take on Lifetime Savings Plan (LSP)?
1. Couples who are starting a family and would like to save for future generations
With no policy maturity date, you can now accumulate savings for as long as you want. With the option to transfer the plan to your children, it makes an invaluable gift for the next generation.
2. Individuals who have not determined their financial goals yet, but would like to get started
Deciding on wealth accumulation goals and their specifics may be too early for some, especially the younger generation. With LSP, there is no need to worry about setting a maturity date, and one can enjoy the flexibility to withdraw partial funds for future emergencies.
3. Those seeking guaranteed returns
The policy continues to run until termination, and it offers guaranteed returns after a certain number of years. You have the flexibility to keep the funds in the policy if you wish. The longer you maintain the funds in LSP, the greater the returns.
4. Individuals seeking flexibility
LSP can plug financial gaps that are unexpected or have been insufficiently provided for. For example, whilst parents would like to ensure that their children get the best education, there are no guarantees as to which route, their kids will eventually undertake. LSP gets you started on saving, but it does not lock you down on maturity dates and allows for fund withdrawals whenever you need them.
5. People who need a systematic savings approach
Unlike that of an erratic high-risk high-return investment vehicle, an endowment plan creates an organized system to help one save in a disciplined manner.
In summary, a profile of any financial disposition can benefit from Lifetime Savings Plans (LSPs).
- Builder can enjoy the flexibility of early fund withdrawal for his/her startup enterprise.
- Giver will adore the feature allowing policy transfer to loved ones or future generations.
- Saver can enjoy maximum security with the guaranteed returns.
- Spender benefits from the discipline to save with LSP. (That’s me!)
If you wish to get started on such savings structure, download “Guide to Lifetime Savings Plan” to find a feature comparison across multiple LSPs offered by various insurers in Singapore.
Article by Stephanie Choong
The writer is a Senior Financial Services Consultant of GEN Financial Advisory