Guaranteed + Bonus Endowment Plans

What it is

This is the most common style of endowment plan sold in Singapore, and the one most benefit illustrations are built around. It sits in the middle of the chart: more upside than a pure capital-guaranteed plan, but with a meaningfully larger slice of the projected return sitting outside the insurer's contractual obligation.

Regulation requires these illustrations to show two standardised scenarios: the Upper Illustration Rate of 4.25% p.a. and the Lower Illustration Rate of 3.00% p.a. These are industry-wide caps set by the Life Insurance Association Singapore (LIA) that every insurer must illustrate at or below -- not a promise from this specific product, just the ceiling the whole industry is required to use. The gap between those two lines on your illustration is, in effect, the size of the bet.

How it's structured

• A guaranteed cash value component, contractually specified and typically modest -- often close to or below the capital-guaranteed tier's return.
• A reversionary bonus, declared periodically by the insurer based on the performance of its participating fund, which once declared is generally locked in.
• A terminal bonus, paid only at maturity or full surrender, which is the least certain component and can be reduced or withdrawn by the insurer.
• Regulated illustration scenarios at the LIA's 4.25%/3.00% Upper/Lower Illustration Rates, reviewed annually by the industry body, so what you see is a range, not a promise. The actual outcome could land anywhere in, at, or below that range.

What kind of return to actually expect

Illustrated total returns (guaranteed + non-guaranteed) on these plans commonly land in the 2%–4% p.a. range at the 4.25% upper illustration rate, with the guaranteed floor often below 1%. Some insurers have paid bonuses below their upper illustrated scenario in low-rate or volatile years -- the illustration is a scenario, not a track record guarantee.

The honest way to read one of these: treat the guaranteed line as the number you can actually plan around, and treat the higher illustrated line as "possible, not promised."

The risks, plainly

• Illustration gap -- the difference between the guaranteed and illustrated-upper figures can be several percentage points; actual bonuses declared can fall anywhere in between, or occasionally below the guaranteed-plus-lower scenario in a bad year.
• Bonus cuts -- reversionary and terminal bonus rates are reviewed periodically and can be reduced for new and sometimes existing policies when investment conditions weaken.
• Early surrender penalty -- same structural issue as capital guaranteed plans, often more pronounced since a larger share of value is back-loaded into the terminal bonus.
• Concentration in one insurer's par fund -- your bonus depends on the performance and management of a specific fund you don't control or fully see into.

Who it tends to suit

The two-rate illustration format only earns its keep if you actually use it: someone comfortable reading both lines separately, treating the guaranteed figure as the plan and the 4.25% figure as a maybe, gets real information out of this structure. Someone who only remembers the bigger number on the cover page would likely be better off with something that doesn't require that discipline, or with par fund whole life policies if the horizon runs longer than this product's fixed term.

This describes how this type of product is typically used -- it isn't a recommendation for your specific situation. Talk to a licensed adviser before deciding.

Common questions

Which number in the illustration can I actually rely on?

Only the guaranteed cash value column. The illustrated total (guaranteed + bonus) at either scenario rate is a projection based on assumptions that can change.

Can the insurer really pay less than the lower illustrated scenario?

The guaranteed component is contractual and won't fall. The non-guaranteed bonus portion, however, is reviewed periodically and has in practice been reduced by insurers across the industry in weaker investment years.

Is the bonus rate the same across all insurers?

No -- each insurer manages its own participating fund and declares its own bonus rates, so identical-looking illustrations from two insurers can diverge significantly in actual paid bonuses over time.