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Why Your Savings & Investment Plans Can Be Valuable In The Midst Of Rising Inflation & Great Uncertainty

With high inflation, growing our savings today is more important than it ever was.


This article was written in collaboration with NTUC Income (Income). All views expressed in this article are the independent opinion of DollarsAndSense.sg based on our research. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.

Over the past two years, life has not been easy. With the COVID-19 pandemic heading into its third year, most of us would have already adapted to the way we live, work and play. Some of us had to move on from our previous roles in the hospitality, airline and F&B industries, while others had to cope with pay cuts or lower-than-expected bonuses.

In addition, inflation has not been kind to us either. If you feel like things around you in Singapore are getting more expensive, you are right. In 2021, Singapore’s Consumer Price Index (CPI) increased by 2.3% and there is growing concern that inflation will continue to remain higher than usual in 2022, and possibly for the years ahead. Unfortunately, inflation isn’t just a Singapore-specific matter but a worldwide phenomenon.

To further exacerbate the problems we are facing, we are currently still stranded by economic uncertainty. In Singapore, we are likely to see an increase in interest rate, which would impose an even greater cost pressure on loans that businesses and individuals have such as our home mortgage.

The increase in interest rate, both in Singapore and across the world, has also caused the stock market, among other reasons, to behave like a roller coaster. It is anyone’s guess how the year of 2022 and beyond will pan out. In addition, with the recent announcement of GST increase to 8% in 2023 and 9% in 2024, things are not going to be any cheaper.

Read Also: Singapore Inflation Rate In 2021: Here’s How Much Prices Of Everyday Goods And Services Have Increased

Why Staying Ahead Of Inflation Is Important

More so than ever, the need to stay ahead of inflation is vital, especially during uncertain times. If you didn’t already know, putting our cash savings into a biscuit tin or a savings account that gives you low interest isn’t going to be a good long-term solution to the inflation problem – though we do recognise that having emergency savings serve an important purpose.

Insurance savings plans and investment-linked plans (ILPs) are among some of the financial instruments that can be used to help our savings stay ahead of inflation amid the uncertainty. These products are designed to help us grow our savings so that we can retain our purchasing power over the long-term.

An example of such an insurance saving plan would be the Gro Cash Flex plan offered by Income. This is a plan that allows you to choose a premium term of 5, 10, 15, 20, 25 or 30 years, with a policy term of 10, 15, 20, 25, 30 years, or till age 120, depending on the selected premium term. One of the key benefits of Gro Cash Flex is that you can enjoy yearly cash payouts from the end of the 2nd policy year to enjoy the things you like now, while still saving for your future.

Such participating insurance savings plans will have the premiums invested in a participating fund with a total return upon maturity of the plans consisting of both guaranteed benefits and non-guaranteed bonuses.

Gro Cash Flex provides capital guarantee upon maturity of the plan1. In addition, there are also non-guaranteed bonuses that will be added to the plan. You will also receive protection in the event of death or Terminal Illness (TI) as you save.

There are many more features for this plan and you can find out more about them here.

Build Your Wealth Via A Smart Approach For Life’s Important MileStones

For those who prefer to invest your savings, you can consider an investment-linked plan (ILP).

An example would be AstraLink, an ILP offered by Income. Such a plan invests your regular premiums into a wide range of funds that you can choose from, depending on your investment goals and investment risk appetite.

Unlike an insurance savings plan, ILPs don’t provide guaranteed returns. Returns from the plan are from the funds that you choose to invest in. By starting your investment journey early, you can give your investment portfolio the best possible chance to maximise your potential returns with the effect of compounding returns. Staying invested in the long-term also allows you to avoid market timing and to ride out any short-term market volatility.

With AstraLink, you can receive an investment bonus of up to 67.0% of your regular premiums paid in the first policy year.

Source: Income, AstraLink Brochure

Why Investment Bonus Is Useful

Investment bonus can be very useful. This is because these bonuses, given at the start of the investment journey, can compound to a large amount over time.

For example, if you invest $2,400 a year through AstraLink for a Minimum Investment Period (MIP) of 20 years with a sum assured multiple of 20x, you will enjoy an investment bonus of 40% of your regular premiums paid in the 1st policy year. This amount – $960, is an upfront bonus that can compound over the long-term to give you a potentially better return. In the long-term, you don’t just enjoy the compounded returns from the capital you invested, but also the returns earned by your investment bonus. The investment bonus also helps buffer against any losses incurred in the early years.

In addition, there is also an annual loyalty bonus that will be given starting from the 10th policy anniversary until the end of the MIP, and also if you continue investing after the MIP. The annual loyalty bonus provides additional incentives for you to continue investing long-term.

Source: Income, AstraLink Brochure

Beyond serving your investment needs, AstraLink also provides protection in the event of death, Terminal Illness or Total and Permanent Disability (TPD) to ensure that your loved one remains financially protected if any mishap happens.

One thing about ILPs such as AstraLink is that you can choose the level of insurance coverage you want, subject to the minimum and maximum sum assured multiple and adjust the coverage level for different milestones in life. For example, during certain life stages such as getting married and buying a property, you may wish to increase your insurance coverage or regular premiums without health assessment3

Source: Income, AstraLink Brochure

For example, as you grow older, you can choose to pay a higher premium so that you can invest more while also enjoying higher insurance coverage. And even after the MIP is over, the policy allows you to continue investing at the amount you want.

With the retirement option, you can even choose to reduce the sum assured to zero from age 55 onwards and after your chosen MIP to maximise wealth accumulation for your golden years. This will make your investments work even harder for you to accumulate for your golden years.

As both insurance savings plan and investment-linked plans such as Gro Cash Flex and AstraLink respectively are mid to long-term financial commitment, it’s vital for anyone who are thinking of buying these plans to not only consider the long-term affordability of the plans, but also the long-term goals they hope to achieve through these plans. Premature surrendering of these plans could result in a financial loss or a less-than-ideal return as opposed to holding it till maturity (Gro Cash Flex), or completing the regular premiums payable for the MIP (AstraLink).

To cater for life’s uncertainties, investment-linked plans may have a feature that allows policyholders to take a break from paying premiums. For AstraLink, the premium holiday period ranges for up to 24 months from the 3rd anniversary with no premium holiday charge, depending on your chosen MIP. For Gro Cash Flex, premiums for the basic policy and Savings Protector rider can be waived for up to 6 months if the policyholder is retrenched and remain unemployed for 3 consecutive months.

Growing Our Cash Savings Is Vital During An Uncertain Period

Whether it’s choosing an insurance savings plan such as Gro Cash Flex that provides both guaranteed benefits and non-guaranteed bonuses, or an investment-linked plan such as AstraLink that could provide better returns at a higher risk level, or having the knowledge to invest on your own, there is no question that growing our cash saving is vital during this uncertain period where we are facing inflation all around the world.

If you are keen to grow your wealth but are unsure of how to get started, speak to Income’s advisors today.

Important Notes:

1 Capital guarantee on Gro Cash Flex excludes any optional rider(s), on the condition all premiums are paid, and that the policy is held until maturity date with no policy alterations or claims made during the entire policy term.

2 Critical Protect (ILP) is a whole life unit deducting rider. The policy term of this rider will follow the policy term of the basic policy. This rider cannot be terminated during the MIP of the basic policy. For angioplasty and other invasive treatment for coronary artery, we will pay 10% of what we would have paid for the other specified dread diseases, subject to a maximum amount of $25,000. The benefit for angioplasty and other invasive treatment for coronary artery will end once we make this payment. The rider will continue with a reduced sum assured.

3 Each time the insured experiences a life event, you may choose to take up the Guaranteed insurability option, subject to the policy’s terms and conditions. Please refer to the policy conditions for further details on the life events and the applicable terms and conditions.

4 This figure is based on illustrated investment return of 8.00% per annum. The rate of return used is before deducting the annual management fees of the funds. The figures above assumes that the annual management fee is 1.30% p.a. The performance of the funds is not guaranteed and the policy value may be less than the capital invested.

5 This figure is based on illustrated investment return of 4.00% per annum. The rate of return used is before deducting the annual management fees of the funds. The figures above assumes that the annual management fee is 1.30% p.a. The performance of the funds is not guaranteed and the policy value may be less than the capital invested.

6 Sum assured multiple means the factor we use to work out your sum assured for your basic policy, or for a specific rider that you attach to your basic policy, based on your regular premium when we issue the policy. The sum assured multiple cannot be changed unless the retirement option is exercised.

Disclaimer:

All opinions expressed in this article are solely those of DollarsAndSense.sg and do not reflect the opinions of NTUC Income Insurance Co-operative Limited (“Income”). Income is not responsible nor liable to any party in any manner whatsoever for such opinions, and DollarsAndSense.sg is solely responsible for any opinion and the accuracy and completeness of any information and intellectual property used in this article. The information contained in this article pertaining to any insurance product or plan is provided and meant for general information only and do not constitute an offer, recommendation, solicitation or advice by Income or DollarsAndSense.sg to buy or sell any product(s), plan(s) or investment product(s). It is not and should not be relied on as financial advice and has no regards for any person’s investment and financial needs. If you are unsure whether this product or plan is suitable for you, you may seek personalised financial advice from a qualified insurance advisor. Otherwise, you may end up buying a product or plan that does not meet your expectations or needs. As a result, you may not be able to afford the premiums or get the insurance protection you want. Precise terms, conditions and exclusions of the product are found in the policy contract.

For customised advice to suit your specific needs, consult an Income insurance advisor.

Protected up to specified limits by SDIC (applicable for Income products that fall under the Policy Owners’ Protection Scheme).

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Information is correct as at 6 May 2022.