Key takeaways
- Bank Negara Malaysia (BNM) defines endowment insurance as protection plus savings: it pays at maturity, on death or on permanent disability during the term, whichever comes first.
- Cash bonuses, reversionary bonuses and terminal bonuses on a participating policy are all non-guaranteed, and BNM makes insurers state that the face value of reversionary bonuses is not paid if you end the policy early.
- LIAM says a policy usually needs about 3 years in force before it has a cash value and that surrendering before maturity means a loss; BNM makes insurers warn that a surrender pays much less than the premiums paid.
- PIDM protects fixed deposits up to RM250,000 per depositor per member bank, and life policy maturity, surrender and income benefits up to RM500,000, but not the maturity or surrender value of an investment-linked unit portion.
- EPF's Retirement Income Adequacy framework took effect on 1 January 2026 with savings targets at age 60 of RM390,000 (Basic), RM650,000 (Adequate) and RM1.3 million (Enhanced).
- Deferred annuity premiums and PRS contributions share a tax relief of up to RM3,000 a year from YA 2025 to YA 2030, separate from the RM7,000 life insurance and EPF relief.
What is a savings plan or endowment plan, and how does it work?
When clients tell me "I want a savings plan", they usually mean a savings-type life policy, often called an endowment plan. Bank Negara Malaysia's policy document on Product Transparency and Disclosure (December 2024) defines endowment insurance as cover that combines protection and savings: it pays at maturity, on the death of the insured or on permanent disability during the term, whichever comes first. Insurers must also tell you whether a product is meant for protection, savings, investment or a mix.
In plain terms, a savings plan usually has:
- A premium term, for example 5, 6, 10 or 20 years, after which you stop paying (limited pay).
- A policy term, for example 15 or 20 years; some plans run to age 70, 80 or even 90.
- A death or disability benefit paid to your family if something happens during the term.
- Payouts along the way on some plans, such as a yearly Guaranteed Cash Payment or survival benefit; other plans let the money build up inside the policy.
- A maturity benefit paid as a lump sum at the end of the term.
Savings plans sold in Malaysia come in three broad designs. Before you buy, or when you dig out an old policy, find out which one you have:
| Design | What is guaranteed | What is not | Where to check |
|---|---|---|---|
| Participating (with profits) | Sum assured, guaranteed cash payments and guaranteed surrender value written in the contract; reversionary bonuses already added to the policy (paid at maturity or death if premiums continue) | Future cash, reversionary and terminal bonuses | Sales illustration and the yearly annual bonus statement |
| Non-participating, guaranteed benefits only | The guaranteed cash payments, maturity benefit and surrender values in the contract | No bonuses; you get the amounts written in the contract | Product disclosure sheet (PDS) and policy contract |
| Non-participating with an investment-linked portion | Survival benefit, maturity benefit and death benefit as written in the contract | The investment portion (for example the total investment value built by an investment booster), which moves with fund prices | PDS and fund unit statements |
As an example from Great Eastern's current range, GREAT Wealth Enhancer is a non-participating limited-pay endowment with a 15 or 20 year term and a maturity benefit; its investment booster buys fund units, and the product page states that fund performance is not guaranteed. Two plans can both be called "savings plans" and still work very differently.
Are the returns guaranteed? Guaranteed Cash Payment, non-guaranteed bonus, reversionary bonus and terminal bonus explained
This is the question I am asked most. The answer: only what the contract labels guaranteed is guaranteed; everything else is not. BNM's policy document on Management of Participating Life Business (July 2023) explains that a participating policy lets you share in the profits of the insurance fund on top of guaranteed benefits, with bonuses decided by the insurer. It defines regular bonuses (cash bonus, cash dividend, reversionary bonus) and terminal bonuses as non-guaranteed.
| Term | What it is | Guaranteed? | When you get it |
|---|---|---|---|
| Guaranteed Cash Payment (GCP) / survival benefit | Cash paid at set intervals, written in the contract | Yes, as per contract | Yearly or in stated policy years |
| Maturity benefit | Lump sum at the end of the term | The contractual part is guaranteed | At maturity |
| Cash bonus / cash dividend | Yearly cash bonus on a participating policy; you can usually take it or leave it with the insurer to earn interest at a rate it sets | No | After it is declared |
| Reversionary bonus | A bonus declared, usually yearly, and added to the sum assured of a participating policy | Future declarations are not guaranteed; once added, it is paid with the sum assured at maturity or death if premiums continue | Maturity or death; a surrender pays a lower cash value |
| Terminal bonus | A one-off bonus worked out when the policy ends; it can be a large part of the final payout | No | When the policy ends |
| Investment booster / total investment value | The part of a non-participating plan that buys fund units | No, it rises and falls with fund prices | On withdrawal, maturity or surrender |
BNM's sample explanation of participating policies also describes smoothing: insurers may hold back some profit in good years to support bonuses in poor years, but if results stay poor for several years, bonuses can still be cut or not paid at all. LIAM adds that bonuses are set per RM1,000 of sum assured and can go up or down with the economy and investment returns.
Four things to check in a sales illustration
- Read guaranteed and non-guaranteed columns separately. For participating policies, BNM requires the illustration to show premiums paid, guaranteed survival benefits, guaranteed death benefits, guaranteed surrender value and non-guaranteed benefits for every year from 1 to 20, then every five years.
- Both scenarios are hypothetical. Non-guaranteed benefits are shown under a lower and a higher return scenario that BNM prescribes, and BNM states these do not reflect past or expected returns. Do not plan around the higher column.
- Ask for the annualised return, not the total payout. For products with guaranteed survival or maturity benefits, BNM requires any marketing material that illustrates returns, including the sales illustration and brochure, to show the annualised return prominently, and bars insurers from advertising guaranteed cash payments as one cumulative total.
- Compare with your annual bonus statement every year. It must show bonuses declared this year and in the previous five years, accumulated reversionary bonuses, the guaranteed cash value and the total cash surrender value.
LIAM also reminds buyers that a sales illustration is not a legal document; your rights are set out in the policy contract.
How much do you lose if you surrender a savings plan early, and what else can you do?
A savings plan is a long-term contract. LIAM's introduction to life insurance puts it plainly: a policy usually acquires a cash value, its surrender value, only after it has been in force for some years (normally at least three), and you will lose if you surrender before maturity. BNM also requires insurers, when you stop paying, to warn that a surrender pays much less than the premiums paid.
Why so little in the early years? Early premiums first pay for the life cover during those years and the cost of setting up and selling the policy; only the rest builds the cash value. Great Eastern's current savings plan pages state that a policy has no guaranteed minimum cash value until premiums have been paid for two years, that early termination involves high costs, and that you may get back less than you paid.
Two points people miss on participating policies:
- BNM requires marketing material to state that the face value of reversionary bonuses is not paid on early termination or conversion. The bonus total on your statement can be much higher than what a surrender pays.
- For participating policies designed and sold from 1 July 2005, the insurer must pay at least 100% of the policy's asset share or the guaranteed benefit, whichever is higher, on death or maturity; but a surrender in the first half of the term only has to pay at least 90% of asset share on an aggregate basis. The earlier you leave, the more it costs.
If you really cannot keep paying, compare these before you sign a surrender form:
| Option | How it works | What you give up |
|---|---|---|
| Surrender | You take the current surrender value and the policy ends | The cover; in early years you usually get back less than you paid; buying again later costs more at an older age and needs new underwriting |
| Reduced paid-up | Once there is a cash value, you stop paying and the policy stays in force | A lower sum assured and maturity benefit |
| Automatic premium loan (APL) | If the cash value is enough, the insurer lends you the premium automatically | Interest is charged and the cash value keeps falling |
| Policy loan | You borrow against the cash value and keep the policy | Interest is charged; any unpaid loan and interest is deducted at death or maturity |
| Withdraw the investment portion (if any) | You take out value built by an investment booster or similar feature | The amount depends on fund prices at the time and is not guaranteed |
How insurers notify you after missed premiums, how long APL runs and how to reinstate a lapsed policy are covered in my guide to grace periods, lapse and APL. If someone tells you to "surrender the old one and buy a better new one", LIAM warns this is usually not in your interest: you are older so the new premium is higher, the cash value has to build up from zero again, and the two-year contestability period starts over.
Savings insurance vs fixed deposit, EPF, ASNB and unit trusts: what is the difference?
All of these "store money", but they do different jobs. I usually ask clients to decide first what this money is for: to be reachable any time, to retire on, to grow, or to save while giving the family a layer of protection.
| Savings insurance | Fixed deposit | EPF | ASNB fixed price fund | Unit trust | |
|---|---|---|---|---|---|
| Main job | Long-term savings plus life cover | Short to medium-term saving | Compulsory retirement savings | Saving and investing | Investment growth |
| Capital and returns | Contractual amounts guaranteed; bonuses and investment portions are not | As per the bank's fixed deposit terms | Dividend declared yearly based on investment performance; Simpanan Konvensional has a minimum dividend rate | Unit price fixed at RM1.00; income distribution "if any" | FIMM: no fixed rate of return, principal value fluctuates, return not guaranteed |
| Early access | You can surrender, but early years usually mean a loss | Depends on the bank's terms | Only through EPF's withdrawal schemes | Can be redeemed | Can be redeemed at the current price |
| Life cover | Yes | No | Not an insurance product | No | No |
| PIDM protection | Maturity, surrender and income benefits up to RM500,000 (not the unit portion of investment-linked benefits) | Up to RM250,000 per depositor per member bank, including interest | Not applicable | Outside deposit insurance (PIDM lists unit trusts as not protected) | Not protected by PIDM |
The PIDM figures come from PIDM's FAQ on takaful and insurance benefits protection and its deposit insurance FAQ. The ASNB column uses ASM, a fixed price fund open to all Malaysians, as the example.
The way I see it, each tool has one job:
- Emergency money sits in a savings account or fixed deposit where you can reach it.
- The base of your retirement is EPF, topped up voluntarily if you can.
- Money that can ride the ups and downs for growth can go to unit trusts or ASNB.
- A savings plan fits money you will not touch for 10 years or more, that you want to "force" yourself to save, and that you want to pair with life cover.
A savings plan's strength is not the highest return. It is discipline, a partly guaranteed amount and a payout for the family if something happens. Comparing its returns with a fixed deposit or a unit trust compares products built for different jobs.
What if my EPF is not enough to retire? And what is an annuity?
From 1 January 2026, EPF's Retirement Income Adequacy (RIA) framework sets three savings targets at age 60. EPF also publishes the matching figure for every age; here are ages 40 and 50:
| Level | At age 60 | At age 40 | At age 50 |
|---|---|---|---|
| Basic Savings | RM390,000 | RM107,000 | RM217,000 |
| Adequate Savings | RM650,000 | RM149,000 | RM339,000 |
| Enhanced Savings | RM1,300,000 | RM279,000 | RM652,000 |
The Adequate level comes from EPF's Belanjawanku 2024/2025: a single elderly person in the Klang Valley needs about RM2,690 a month, multiplied by 240 months (about 20 years), rounded to RM650,000. EPF also reported that as of October 2024 only about 36% of active formal members met the Basic Savings level for their age at the time.
Worked example: age 40 with RM120,000 in EPF (assumed figure)
| Item | Amount | Note |
|---|---|---|
| Current EPF balance | RM120,000 | Assumption for this example, not a projection |
| EPF Basic Savings at age 40 | RM107,000 | Already above |
| EPF Adequate Savings at age 40 | RM149,000 | RM29,000 short |
There are several ways to close a gap: voluntary EPF contributions (now called i-Simpan and i-Topup), a Private Retirement Scheme (PRS), your own investments, and a savings plan or annuity. A savings plan's role here is to lock away money you will not touch early, with cover attached, not to chase the highest return.
What is an annuity?
An annuity is a contract where you pay a lump sum or a series of premiums and the insurer pays you income at regular intervals for a period. LIAM and LHDN Public Ruling No. 4/2014 describe two types:
- Immediate annuity: income starts within a year of buying, usually paid for with a lump sum; it suits people about to retire or already retired.
- Deferred annuity: income starts more than 12 months after buying; it suits people still working who want retirement income later. Under LHDN's ruling, a deferred annuity bought from 2014 must meet Bank Negara's Retirement Saving Standards: payments start no earlier than age 55 and last at least 10 years or until age 70, whichever is later.
On tax, LHDN's notes for the 2025 tax return state that PRS contributions and deferred annuity premiums share one relief of up to RM3,000 a year from YA 2025 to YA 2030. Premiums for a savings plan on your own life or your spouse's life count under life insurance relief (up to RM3,000, within the RM7,000 cap shared with EPF). More detail is in my insurance tax relief guide. This is general information, not tax advice; check LHDN's latest notes before you file.
How do I leave money for my children, and who is a savings plan for?
There are a few common ways to set money aside for children, and each solves a different problem:
- Your own life policy, with your child as nominee. If you pass away, the benefit goes to the person you named. How to nominate, and the difference between a trust nominee and an executor, is in my insurance nomination guide.
- An education savings plan on your child's life, with a payor benefit. If the parent paying dies or becomes disabled, future premiums are waived and the plan carries on for the child. LHDN's education and medical insurance relief (up to RM4,000) has conditions: when the child is the insured, the paying parent must be covered by a payor rider of the same duration, and the maturity amount must be payable when the child is between 13 and 25. A life policy on a child's life does not qualify for the life insurance relief. More on my education plan page.
- A plan you can pass to the next generation. Great Eastern's GREAT Multi-Gen Wealth 3, for example, lets you appoint an Alternate Policyowner and a Secondary Life Assured or use a Change of Life Assured option so the policy can continue for the next generation; each step needs the company's approval and the policy must still be in force.
- A will for everything else. Your house, deposits and investments are not sorted out by an insurance policy; a will does that. I am also a Rockwills will representative, so we can look at both together.
Who suits a savings plan, and who does not?
| Usually suits | Usually does not suit |
|---|---|
| Stable income, and this money will not be needed for 10 years or more | No emergency fund yet, or irregular income |
| You want to force yourself to save and want life cover attached | Your main goal is the highest possible return |
| Medical card, life and critical illness cover are already in place | Basic protection is still missing |
| You want a partly guaranteed sum for education, retirement or legacy | You may need the money within a few years, for a house or a business |
The problem I see most often is not the wrong product but a premium term that is too long or an amount that is too high, so the plan is surrendered a few years later at a loss and the cover is gone. A smaller amount you can keep paying to the end is better than a bigger one you have to stop.
Next step: read your policy properly before you buy or surrender
If you are thinking about a savings plan, or have an old endowment policy and are not sure whether to keep it, start here:
- Find the policy contract, the sales illustration and the latest yearly statement (for participating policies, the annual bonus statement).
- Separate what is guaranteed from what is not, and note the guaranteed surrender value and the current total surrender value.
- Check that your emergency fund, medical card and life cover are in place before deciding on the savings part.
- Before you stop paying, compare reduced paid-up, a policy loan and a surrender; do not rush to sign a surrender form.
I am a Great Eastern Life Planning Advisor and have served families in Kuala Lumpur and Selangor for 13 years, mostly around Puchong, Seri Kembangan, Serdang and Cheras. Send me a photo of your policy or illustration on WhatsApp and I will explain the guaranteed and non-guaranteed parts in Mandarin, English or Cantonese. No hard selling: whether to buy or keep a plan is your decision.