Achieving Higher and More Stable Returns: Savings Insurance vs. Fixed Deposits

Wealth management is an essential part of building a prosperous future, with saving and wealth accumulation playing one of the key roles in achieving financial goals. Many have started planning to grow their wealth and create a fulfilling life. However, with a wide variety of savings options available, how do you choose the one that suits you best? Between savings insurance and fixed deposits, which would offer higher returns and greater stability? This blog post consolidates and analyses key information about these two options to help you manage your wealth with ease. 

Throughout life, we set various goals for different stages, such as marriage, home ownership, having children, retirement, all with the aim of securing a well-planned future. To achieve these goals, it is crucial to start wealth management planning early, ensuring that we can achieve our objectives as planned and build a bright future. 

There is a wide range of wealth management solutions to choose from. Among them, savings insurance and fixed deposit plans are fundamental to financial stability. However, as these two options differ in risk and return, it is essential to compare them carefully before making a decision.  

Savings Insurance and Case Study 

Savings insurance is a financial product offered by banks or insurance companies, designed to help with wealth accumulation. These plans typically include death benefit, providing financial security for both the insured and their families. Savings insurance policies generally offer guaranteed cash value as a return, along with non-guaranteed terminal dividend that provide additional gains to the policyholders. Moreover, some savings insurance plans allow the policyholders to pass on their policies to the next generation, with the policy values growing over time and helping to build a lasting financial legacy. 

To illustrate with Generali Life’s LionTycoon Beyond 2 as an example, suppose Mr Yuen purchases a savings insurance policy with an annual premium of USD 60,000. If he starts the policy at age 30 with a two-year premium payment term, his total premium paid would be USD 120,000. By the time he turns 50, the policy’s values would have grown nearly threefold to USD 338,960. At that point, he decides to divide the policy into three parts, allocating shares for his twins—daughter Cara and son Edan—while continuing to accumulate policy values. If Edan later has children, his policy can be further passed down to his daughter Jennie, allowing Mr Yuen’s wealth to be preserved and passed on through the generations. 

Fixed Deposits and Case Study 

A fixed deposit is a savings account set up with a bank to earn interest over a fixed period. Customers can choose to deposit funds in various currencies, such as Hong Kong dollars, US dollars, Renminbi, Australian dollars, British pounds, Canadian dollars and more. Interest rates vary depending on the bank and the selected currency. 

Suppose Mr Lau has an initial principal of USD 120,000. If he deposits it into a fixed deposit account with an annual interest rate of 4% for five years, he will earn USD 24,000 in interest, calculated as USD 120,000 × 4% × 5. If he continues to reinvest both the interest earned and the principal at the same interest rate, his savings will double to USD 248,832 in 20 years. 

The returns from long-term savings insurance grow over time, helping you accumulate more dividends. 

Investors can select a wealth management approach that suits their financial goals, financial capability, and risk tolerance to better prepare for the future. Following the earlier US interest rate hikes, Hong Kong banks have also increased their fixed deposit rates. Many investors have turned to fixed deposit savings plans at banks, seeking higher returns in a more stable manner. 

However, some in the banking sector believe that the US interest rate hike cycle has ended, meaning returns on bank savings plans may fluctuate*. Therefore, before selecting a wealth management strategy, investors should assess market trends and their financial objectives to choose the most suitable option for maximizing returns. 

Long-term savings insurance may offer higher returns, including guaranteed cash value and non-guaranteed dividends, making it a more effective tool for wealth growth compared to fixed deposits. Additionally, long-term savings insurance provides extended protection, benefiting future generations and enabling wealth to be passed down seamlessly. However, investors should carefully review the savings period and return rates of different plans to ensure more stable and sustainable returns. 

*According to Standard Chartered Hong Kong’s Senior Investment Strategist, Lloyd Chan, inflation is continuing to ease, and the US economy is slowing down. The Federal Reserve is not expected to raise interest rates again this year, marking the end of the rate hike cycle. 

LionTycoon Beyond 2 is a long-term savings and participating life insurance plan that offers high projected returns to help you achieve your financial aspirations while providing flexibility in passing down wealth. 

With LionTycoon Beyond 2, you will benefit from Guaranteed Cash Value, and starting from the 15th Policy Anniversary, you may apply for the Terminal Dividend Lock-in Options¹ to secure the projected returns from the Terminal Dividend² at that time. You can either allocate the locked-in Terminal Dividend to the Benefit Accumulation Account for non-guaranteed interest accumulation³ or cash it out. 

Additionally, you may partially surrender the policy automatically on annual interval or manually4, to cash out from the policy. Various cash withdrawal options are available to support your financial needs. 

To enhance financial security, LionTycoon Beyond 2 also offers the Extended Grace Period Option⁵ and Premium Holiday Option⁶ for greater protection coverage. Furthermore, you can pass on your policy to future generations through the Legacy Planning Option and Policy Split Option, ensuring your wealth is preserved across generations. 

Download the product brochure for more details or contact our insurance advisers for a free consultation.