Should I surrender my AIA SmartRewards Saver (II) plan which will cause me to lose $800+ now?

Hi anon,

First things first, Smart Rewards Saver (II) is not an investment linked policy, so do ensure the correct tagging when posting.

The plan works by give you a cash coupon that'll always be lower than your annual premium after the second year, with a futher maturity coupon at the end of the plan. Although the coupons are guaranteed, the total amount of such cashback plans will typically be lower than the premiums. Personally, I would consider plans that don't have a coupon feature if I wanted to force myself to save as such plans will typically have a better yield and guaranteed payouts tend to be higher than premiums.

You have to ask yourself what is the alternative if you were to drop the plan. If you invest, you can potentially outperform, but you could potentially underperform as well. Having said that, if you really do wish to offload the plan, you may consider looking for a resale endowment broker like PolicyWoke as one way out. Surrendering now will have zero cash value as the plan is only in its second year.

For one thing, it is not exactly correct to look at the guaranteed column of the policy illustration table alone. This is because the endowment policy will also distribute bonuses, and the information can be found under the non-guaranteed column of the policy illustration.

More Details: Reversionary Bonus and Terminal Bonus Singapore

Altogether, you may wish to refer to the total returns (i.e. guaranteed plus non-guaranteed returns) to determine the amount that you may get back upon maturity. Then again, you must remember that the non-guaranteed portion of the cash value depends on AIA's participating fund performance.

Latest Results: AIA Participating Fund Performance 2019

In like manner, if you choose to invest on your own, the potential returns that you may get is also non-guaranteed. In other words, your money is still subjected to investment risk.

At this point, you may wish to evaluate and determine whether you are a competent investor and your own, and do not require the guaranteed component from the endowment policy. In any case, there is no right or wrong answer. Instead, it is how you do your financial planning to create a portfolio that you will become confident with.

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