HSBC Life | Other than a time deposit, what other options are there for saving money?

April 2024

There is a variety of savings solutions on the market, including time deposits. How do they compare with other options such as fixed-term endowment plans in view of interest rate changes and other factors? Read on to find out.

Choose the right savings solution for your needs

Many Hong Kong people save regularly as a way to build up their financial strength for the future. A survey by the Hong Kong Deposit Protection Board has found that 67% of Hong Kong people maintain a saving habit. On average, each person puts aside HKD9,000 per month, a new high since the survey was first introduced*. People use different wealth management tools to save. Generally speaking, the most widely used options include time deposits and fixed-term endowment plans. Whether they are saving to retire, get married, buy a property, pursue continuing education opportunities or start a business, savings deposit and endowment plan customers enjoy a high degree of flexibility. They can choose from different currencies and terms to suit their needs, abilities and preferences. Even though both options are relatively low-risk, do you know the differences? Which one is the right solution for you?

Time deposit vs fixed-term endowment plan

	Time deposit	Fixed-term endowment plan
Description	You open a time deposit account at a bank and make a deposit. When the time deposit matures, you will recover the principal plus interest, which is higher than that offered by regular bank accounts. Terms range from 7 days to 12 months. You can select the deposit amount and term at the bank, or through phone or online banking. The process is relatively simple.	An insurance policy with a fixed term and premium, providing life protection during the policy term based on policy provisions. The policyholder transfers capital to the insurance company in the form of insurance premiums and and receives a guaranteed maturity value the policy matures.
Risks	You lose the accrued interest and need to pay penalty if you withdraw the deposit before the maturity date. Investors looking to re-invest the money should take into account possible changes in interest rates. Careful monitoring of interest rate movements is advised.	The term of a fixed-term endowment plan is generally longer than that of a time deposit. If the policyholder surrenders the policy before the policy’s cash value breaks even, they will lose the principal (premiums). If premiums are not paid by autopay and the policyholder misses premium payments, the policy will lapse and could be terminated by the insurance company, in which case the amount the policyholder recovers could be less than the premium paid.
Protection	In the event of the failure of a member bank of the Deposit Protection Scheme, account holders can recover up to HKD500,000^# in eligible deposits under the Deposit Protection Ordinance.	The policy’s beneficiary will receive the death benefit in the event of the death of the life insured. Some policies also provide additional accidental death protection and more without requiring extra premiums. The longer policy term gives you the opportunity to lock in a more stable return for the next few years. As for premium payments, you can choose to pay monthly, annually or with a lump sum.

Time deposits and fixed-term endowment plans offer different potential returns. The below examples are based on a time deposit account and a fixed-term endowment plan with the same principal (using HSBC Swift Save Insurance Plan as an example), and reference current market data for per annum interest rates and maturity values. As you can see from the table below¹, if you take out a fixed-term endowment plan with a 2-year premium payment period, you will receive an amount that is 113% of total premium paid at the end of the 3-year policy term, versus a 110% return on principal for a time deposit (please be reminded that time deposit interest rates can rise or fall as a result of market developments).

USD deposit/USD policy:

	Principal / Premium	Term	Per annum interest rate	Interest/Return	Maturity value	Maturity value as a % of principal
Time deposit	USD100,000	3 years	3.30%²	USD10,230	USD110,230	110%
HSBC Swift Save Insurance Plan	USD100,000	3 years	4.22%³	USD13,213	USD113,213	113%

HKD deposit/HKD policy:

	Principal / Premium	Term	Per annum interest rate	Interest/Return	Maturity value	Maturity value as a % of principal
Time deposit	HKD100,000	3 years	3.40%⁴	HKD10,644	HKD110,644	111%
HSBC Swift Save Insurance Plan	HKD100,000	3 years	4.07%³	HKD12,713	HKD112,713	113%

Remarks:

The above tables are provided for illustrative purposes only. All figures are rounded off and may therefore differ from actual values.
The interest yielded by a time deposit account varies according to the deposit amount and term selected. Terms generally range from 7 days to 13 months. The above values are derived from data on 12-month time deposits that were on the market as of 19 February 2024, and assume a fixed interest rate and a renewal term of 2 years. These data will change as a result of market developments. Therefore, actual returns may differ.

Per annum interest rates are calculated based on the HSBC Swift Save Insurance Plan premium discounts offered in April 2024.
Highest rates of return – HSBC Swift Save Insurance Plan

Policy currency	After discount	Before discount
HKD	4.07% per annum – enter the promo code online to enjoy a first-year premium discount of up to 11%	2.10% per annum
USD	4.22% per annum - enter the promo code online to enjoy a first-year premium discount of up to 11%	2.25% per annum

The interest yielded by a time deposit account varies according to the deposit amount and term selected. Terms generally range from 7 days to 13 months. The above values are derived from data on 6-month time deposits that were on the market as of 19 February 2024, and assume a fixed interest rate and a renewal term of 2.5 years. These data will change as a result of market developments. Therefore, actual returns may differ.

Before you commit to a fixed-term endowment plan or a time deposit to support your wealth goals, you should first acquire a thorough understanding of the respective risks of these wealth management tools, and ensure you will have sufficient cash flow to cover contingencies. And keep in mind that, in the event of an early withdrawal or policy surrender, you may suffer a loss.

Saving money is a good habit and an important step towards your wealth goals. For a review of your current and future needs, as well as low-risk savings solutions that may be right for you, visit any HSBC branch to talk to us.

* RTHK: Hong Kong Deposit Protection Board survey finds that Hong Kong people’s average monthly savings have risen to HKD9,000; sense of financial security rebounding (19 December 2023).
#According to The Deposit Protection Scheme administered by the Hong Kong Deposit Protection Board on April 2024.

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Apply online for HSBC Swift Save Insurance Plan with the promo code "MAXSAVER" to enjoy 11% off first-year premium discount.

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Offer ends 30 June 2024. T&Cs apply.