Fixed deposit returns are lower than before — could savings insurance become the new safe haven?

Not long after China and the U.S. reached a trade framework agreement, the situation between Israel and Iran rapidly escalated, and the U.S. became more directly involved, adding further gloom to the already volatile investment markets. Geopolitical tensions, combined with an unclear U.S. economic outlook and interest rate path, mean the "easy days" of the past few years—when the general public could rely on time deposits to lock in steady returns of over 4–5%—appear to be gone. How to find stable returns has become a new challenge for investors.

The direction of US interest rates remains unclear, but Hong Kong dollar fixed-deposit rates have already been the first to "cut rates." Since early May, when the Hong Kong dollar touched the strong-side convertibility undertaking, inflows into the banking system triggered a persistent fall in local interbank rates, greatly reducing banks' incentive to offer high rates to attract time deposits. Although the Hong Kong dollar briefly hit the weak-side convertibility undertaking at the end of June, forcing the HKMA to step in to absorb selling pressure, the banking system’s aggregate balance still exceeded HK$160 billion as of end-June, remaining at a relatively high level. Three-month term deposit rates are generally only about 1% now, a return far lower than before. Using Hong Kong’s May inflation rate of 1.9% as a benchmark, the return on time deposits actually lags inflation.

On the external front, the United States has recently once again been drawn into a Middle East war; whether in terms of the geopolitical situation or the investment market environment, things are becoming increasingly complex and volatile. The dot plot reflecting Federal Reserve officials' projections for future interest rate movements shows a median forecast for the federal funds rate of 3.9% at the end of this year, meaning the Fed may cut rates twice in the four remaining policy meetings this year.

Looking at the past 25 years of data, since 2000 the days when the U.S. has been in a rate-cutting cycle or interest rates have remained at relatively low levels have generally predominated; periods of high rates usually don’t last very long (see chart below). In fact, U.S. government debt is currently over $36.2 trillion and continues to rise, with annual interest payments on the debt exceeding $1 trillion. If high interest rates persist for a period, the U.S. government will face significant fiscal pressure.

Since March 2022 the United States began a rate-hiking cycle to tackle inflation, which only ended in July 2023. The Fed raised rates 11 times during that period, with the federal funds rate target range rising to 5.25% to 5.5%. The Fed did not begin a rate-cutting cycle until September 2024, later than other countries; however, it cut a cumulative 1 percentage point in just three months, lowering the policy rate to 4.25% to 4.5%, a very rapid pace of cuts. Despite the many uncertainties this year, investors should not ignore the possibility that the Fed may cut rates.

Facing falling fixed-deposit rates and a volatile investment environment, some people have begun to look for alternatives, seeking other stable investment tools with returns higher than fixed deposits. Savings insurance may be one such option. Over the past month, I have seen a noticeable increase in inquiries about savings insurance. Current short-term savings insurance products on the market generally have terms of 5 years; certain products, such as FWD’s Smart Advantage Savings Insurance Plan 2, have terms as long as 8 years. Taking into account first-year premium discounts, the guaranteed maturity return can be as high as 4.7% per year, allowing investors to lock in higher interest for a longer period without having to renew every 3 or 6 months like fixed deposits or constantly move funds around in small amounts.

Different savings insurance products offer different guaranteed returns and expected returns. Some products also provide a variety of features to meet different policyholders’ needs, such as currency conversion options, death benefits, different types of dividends, the ability to change the policyholder, and so on. Before purchasing, it is advisable to learn more, including reading the product brochure in detail, understanding the investment strategy behind the product, or reviewing the insurance’s past investment performance and dividend realization history. Choosing a savings insurance policy that suits you is not easy. If you need professional assistance or have any questions, you can consult 10Life licensed insurance advisers.  
 

Further reading:
[Wealth Accumulation] Comparison of Popular Multi-Currency Savings Insurance
[Savings Insurance] Understand Dividend Types — Avoid Budget Shortfalls When Withdrawing Early
[Personal Finance Guide] Comparison of Popular Savings Insurance with Short Premium Payment Terms

Note:
Chart data source: Federal Reserve Bank of St. Louis

Last updated: June 30, 2025

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.