Return from endowment policy

Mr Tan,

You mentioned that the return on an endowment policy is about 4% per annum. In the advertisement by NTUC Income, it should an actual return of 6%. What is the difference in yield?

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My reply:

The return shown in the advertisement is for the past 20 years. During this period, the interest rate earned on money has been quite high and the stock market investments have shown a high appreciation, due to the rapid growth of the Singapore economy. This produced a high yield of 6% on the endowment policies.

The investment yield for the future is likely to be more moderate for the following reasons:

* interest rate has been at a low level for the past few years
* this affects the yield on interest bearing assets (which takes about 70% of the portfolio
* the growth in stock prices is likely to be more moderate, as the economy has matured.