ENDOWMENT POLICIES
![Soul Financial](https://storage.googleapis.com/finmeup-core-prod.appspot.com/users/avatars/Screenshot_20220404-152325_Gallery_600x600_rmnPKFp.jpeg)
Author
Soul FinancialQuick facts about endowment policies
 
An endowment policy is a life insurance contract (coupling term life insurance with a savings program) designed to pay a lump sum after a specific term (on its 'maturity') or on death. Minimum period for an endowment policy is 5 years. You are allowed to withdraw once during the restriction period only. After that you may withdraw at any point in time.
 
Endowment policies allow you to nominate a beneficiary, unlike a share portfolio that will become a part of your estate.
 
Tax facts:
- The growth on your investment is taxed at a flat rate of 30% in the hands of the investment company before it is distributed to you
 
Compare this to:
- Dividends are taxed at 20%
- Capital Gains are taxed at 40% of your income tax bracket. The highest income tax bracket is 45%, which will result in CGT of 18%
 
Endowments thus offer tax benefits to investors with a marginal tax rate of more than 30% who are investing to receive interest income or REIT distributions. Both are taxed at your marginal tax rate, making endowments cheaper if you are in a higher income tax bracket.
 
Consult a financial advisor before entering into any policy. Your individual needs or circumstances will determine the right policy for you.