How participating whole life works: the participating fund, how bonuses are set, smoothing and policyholder safeguards

Definition: two layers, guaranteed benefits and non-guaranteed bonuses

Participating whole life (分红终身寿) is life insurance that covers the life assured for life and lets the policyholder share in the surplus of the insurer's participating fund. Your Guide to Participating Policies, published jointly by LIA and MoneySENSE, defines a participating policy as life insurance that provides both guaranteed and non-guaranteed benefits, with fund performance depending on three things: investment returns, claims experience and fund expenses (May 2020). MoneySense likewise notes that bonuses on participating whole life are not guaranteed, whereas non-participating whole life has guaranteed benefits only and no bonuses (updated 28 September 2026).

The table below separates the benefits in a participating whole life policy by whether they are written into the contract:

The types, frequency and calculation of bonuses vary by product; the product summary and policy contract prevail. How the two kinds of bonus feed into cash value and surrender value is covered in Cash value and bonuses.

The participating fund: where the money goes and the pooled account

Premiums from a participating policy are pooled with those of other participating policies in a single dedicated fund. YGTPP explains that the fund may invest in government and corporate bonds, equities, property and cash, that the asset mix can change over time, and that derivatives may be used for hedging or efficient portfolio management; the fund pays policyholders' benefits and also bears its own operating expenses (May 2020). Unlike an investment-linked policy (ILP), a participating fund's assets are not accounted for policy by policy, and there is no regularly published unit price; part of a participating policy's surrender value is guaranteed, whereas an ILP's surrender value depends on the investment value at the time.

The table below uses Great Eastern's update for 2025 to show the columns commonly found in a public participating fund disclosure. It is one company's disclosure, used only to show that the fund carries several kinds of payout at once; it is not an assessment of any company, and past performance is not indicative of future results.

How bonuses are set: the appointed actuary recommends, the board approves

Each year the process runs broadly in four steps:

1. The appointed actuary (指定精算师) analyses the fund's performance for the year, covering investment, claims, expense and surrender experience.
2. The actuary makes a written recommendation and must ensure that the proposed bonuses are supported by the fund and are fair to all participating policyholders (YGTPP).
3. The board of directors approves the bonuses after considering the actuary's written recommendation, and the bonuses are declared. MAS Notice 320 requires the annual bonus update to state that the bonuses were approved by the board and to say when they vest.
4. Bonuses usually vest on the policy anniversary; Great Eastern's update states that bonuses vest on the policy anniversary.

YGTPP lists the factors that drive bonus levels: the value of the fund's assets, investment performance and outlook, fund expenses, payouts for death and illness claims, surrenders and maturities, and the fund's financial condition. When the fund performs better than expected and claims are lower than expected, there is more room to distribute bonuses; when the long-term outlook is unfavourable, the insurer may reduce future bonuses.

Smoothing: why a good year does not always mean a higher bonus

Smoothing (平滑) is the insurer's practice of avoiding large year-to-year swings in bonuses: in a year of strong fund performance, bonuses are not necessarily raised straight away, and the buffer retained is used to soften the adjustment in weaker years, so bonuses do not necessarily track short-term market movements (YGTPP). Etiqa's product summary puts it as smoothing being intended to be neutral over the long term (Etiqa Version 2.25). MAS Notice 320 requires insurers to describe their smoothing approach for annual and terminal bonuses in both the internal governance policy and the product summary, and to disclose bonus rates for the past three years.

The table below uses the same company's public figures for its SGD portfolio to show that returns and bonus rates are two different curves:

Figures are from Great Eastern's update for 2024 (April 2025) and update for 2025 (2026). The table cannot be used to work out the bonus on any policy and says nothing about bonus changes in other years; it shows only that net investment return went from negative to almost 9% over four years while the company reported bonus rates unchanged in 2024. Smoothing is not a promise: YGTPP states plainly that when fund performance is poor and the outlook is pessimistic, the insurer may need to reduce future bonuses.

Safeguards for policyholders

The PPF Scheme is administered by SDIC, which is not part of the Government; it covers guaranteed benefits only and up to a cap, and is not a guarantee of all the benefits under a policy.

Pre-sale and post-sale disclosure: what you should receive

Where bonus rates change, the update must show revised surrender values at specified ages: policyholders currently under 45 see the value at age 65, those aged 45 to 79 see the value 20 years ahead, and those aged 80 to 99 see the value at age 99. Timing is set by each company in the policy or other documents: Great Eastern states that bonus notices for 2025 are sent in batches by July 2026, while one Etiqa product summary states by October each year.

How to read an annual participating fund update: eight checkpoints

1. Total fund investment return, value of bonuses declared and total assets are measured on different bases; dividing one by another does not give a bonus rate.
2. First confirm which portfolio your product belongs to; Great Eastern's update discloses net investment returns separately for its SGD, USD and other portfolios.
3. Look at the 3-, 5- and 10-year averages and remember that the window rolls: the same company's 10-year average net investment return for the SGD portfolio was 3.68% in the update for 2024 and 4.33% in the update for 2025.
4. Look at the total expense ratio (TER), which covers investment, management, distribution, tax and other expenses; in Great Eastern's update for 2025, the total fund TER excluding the USD portfolio was 1.13%, with a 10-year average of 1.55%.
5. Look at the payout structure: how much went to claims, surrenders and cash bonuses.
6. Look at non-investment factors: whether expense and surrender experience deviated from expectations. The update for 2025 states that expenses were slightly below expectations and surrenders slightly above.
7. Look at asset allocation and outlook: they describe the insurer's view of the factors that affect bonuses, not a promise about future bonuses.
8. Check whether the bonuses were approved by the board and when they vest.

How to read illustration rates and the policy illustration is covered in Costs and the policy illustration. If you need help interpreting a particular annual update against your own circumstances, you can register your request through the contact details on this site.