Earlier this week, Great Eastern decided to relaunch its GREAT205 after receiving overwhelming response for it during September 2017. Heartland Boy’s insurance agent immediately buzzed him about this piece of great news. That is because he had previously missed the narrow window to sign up for it during September as he was still working in Jakarta. Not to pass up on a good offer at the second time of asking, Heartland Boy decided to sign up for the GREAT205 this week. Here are the reasons why he signed up for the Great Eastern GREAT205 using his SRS funds.
What is Great Eastern GREAT205?
Great Eastern GREAT205 is a 3-year single premium, non-participating endowment plan. To break the complex jargon down, it essentially means the following:
- Consumers will invest a lump sum premium into the policy at the beginning
- As GREAT205 does not participate in the fund performances of Great Eastern, it will distribute a guaranteed annual fixed return to the policyholders
- At the end of 3 years when the endowment plan reaches maturity, GREAT205 will also pay out all the premiums that were initially invested by the policyholders
- GREAT205 provides coverage against death and total permanent disability at up to 105% of the premium paid
In all honesty, at 105% of the premiums paid, the coverage against death and total permanent disability is nothing to shout about. Hence, it was obviously not the reason why Heartland Boy bought GREAT205 for and will not be the focus of this review.
Ability To Use SRS Funds To Finance The Premium
The most attractive reason why Heartland Boy bought GREAT205 was the ability to use the funds in his Supplementary Retirement Scheme (‘SRS’) account to pay for the lump sum premium. Both Heartland Boy and Heartland Girl opened their respective SRS accounts in 2015 to lock in the withdrawal age. They will eventually depend on the SRS as a complementary pillar to their retirement funds.
Therefore, using SRS to fund the purchase of GREAT205 represents a great way to make use of the SRS account to get some tax reliefs before the year comes to a close. This is equivalent to killing two birds with one stone- earn a guaranteed return from an endowment plan and qualify for tax relief at the same time.
Furthermore, as with the year-end festive mood, the 3 local banks are each carrying out some promotions to attract deposits in the SRS accounts. As an example, DBS is offering a $50 cash reward for anyone who makes an online contribution of $15,300 into his or her SRS account before 30 December 2017. That is clearly another reason to top up your SRS account.
A Relatively High Interest Rate of 2.05%
The main benefit of GREAT205 is the guaranteed annual interest rate of 2.05%. For a 3-year tenor, this beats most fixed deposits/plain vanilla savings plans in the market. The barrier to entry is also relatively low at $10,000. Of course, other products such as the Singapore Government Bonds would probably be better if one is planning to invest for a period longer than 3 years.
GREAT205’s interest rate of 2.05% is significantly better than the 0.05% interest rate that his idle funds are getting in the SRS. Essentially, Heartland Boy sees this product as an inflation-beating tool. GREAT205’s 2.05% return compares favourably against Singapore’s average core inflation of 1.9% for the past 10 years.
Great Eastern also provides policyholder the option of leaving the annual interest with them to be reinvested based on the current accumulation interest rate of 3% per annum. (note that this is not guaranteed and can be changed) Heartland Boy chose the option of having his interest rate gets compounded further.
When compared with other similar products, GREAT205 Is slightly better than FWD Insurance Endowment Plan which promises 2.02% per annum for a 3-year term as well.
Besides the short tenure and guaranteed yield, GREAT205 guarantees the capital as well. When a product is advertised as capital guaranteed, it is always critical to understand who is ultimately the one delivering on this promise.
Simply due diligence shows that Great Eastern is a unit of OCBC Bank and is listed on the SGX mainboard. Its life assurance division was also given a credit rating of AA- by Standard & Poor’s as at 17 January 2017. With a solid blue chip backing Great Eastern and the very commendable credit rating assigned, Heartland Boy thinks the chances of him losing his principal are rather unlikely.
Information on Eligibility
While acceptance into this policy is guaranteed as no medical underwriting is required, do note that only existing Great Eastern customers (whether as a policyholder or life assured) are eligible to purchase GREAT205. Non-Great Eastern customers can be eligible if they purchase any of the following plans with a minimum annual premium of $200:
- Individual life insurance or accident and health policies (including Dependants’ Protection Scheme and ElderShield plans)
- Flexi Maternity Cover or MaxMaternity Care
- General insurance policies but excluding single trip travel insurance
Do note that due to overwhelming response, the relaunch of GREAT205 has ended at the time of writing. Yes, the tranche ended faster than Heartland Boy could write about his experience. But hey, perhaps there will be a third time lucky?
Heartland Boy has always advocated investing his SRS funds in ETF. For that, he practises a dollar-cost average approach of buying whenever the index falls 10% from its highs. However, looking at how the market had performed this year, there was no chance to deploy this capital in his SRS account. Therefore, the high interest rate and short tenure of GREAT205 makes it the best investment option while waiting for the market to take a breather.
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Related products include NTUC Income Capital Plus 3-Yr Endowment Plan