Category: New Products

We all know that interest rates have been dropping, dropping and… dropping.

the good news? homeowners are now paying a much lower rate than before, with rates going as low as 0.9%p.a. So if you have not refinanced your home loan, you really should do it as soon as you can.

The bad news? saving rates on our deposits have also fallen to a new low. Even the bank accounts that were supposed to provide a ‘superior’ rate had also fallen. This is despite many consumers having committed to the bank’s requirements previously. This is also the reason why I am often against the idea of committing to an insurance/investment plan at the bank, just for a higher saving account rate.

So what do we do?

Recently, one of our partners (an insurer) launched a 3-years guaranteed participating saving plan (basically, this means policy does not participate in the insurer’s return so you will not get more than the guaranteed rate). The 3-year plan offers 1.8%p.a return at maturity. The plan was snapped up quickly.

In fact, within hours.

Fortunately, there are other insurers who are progressively launching similar short tenure products. However, the rates are lower, between 1.48%-1.6%p.a. So for those who are keen on such solutions, it is really important to keep in the know because these days, they are always gone before you know it. (For context, the rates for such short term plans are usually between 1.2-2.3%p.a, depending on the interest rate environment.)

Are such solutions suitable for you?

Personally, I do not hold any of such short term saving plans because
(1) I either need the money within 3 years – think emergency cash /liquidity needs or
(2) I do not need the money until 20-30 years from now, and which in this case, I would rather invest or save into a longer term saving plan that gives a higher return.

So who should get this?

I do highly recommend such plans to the pre-retirees (if they have maxed out other better saving options) or to those who have saved a lump sum for a near term use (such as renovation/education funding needs at a 3 year mark). If not, it will be better to explore other options because 1.8%p.a is really just barely beating inflation 😦

Cheers