Which agency savings plan has better policies? In terms of flexibility and returns?

Let's try and give you a breakdown so you know what are the things to look out for when choosing a savings plan that suits your needs.

Participating Policy

Generally, endowment savings plan are participating policies. As a result, your money is invested into the insurance company's participating fund. Here is how it works:

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What is a Participating Fund?

For the most part, it is important to understand the investment allocation made by the participating fund. For instance, one company may place greater emphasis on equities in order to give policyholders the same rate of return as compared to another insurance company that placed greater emphasis on bonds.

As a result, most of us prefer a more conservative route since it is unnecessary to take additional risk than required for the same return (to policyholders). Furthermore, this leads to higher expenses which will indirectly affect the policyholders (explanation in my post on participating fund).

Bonuses

Next, we will find out how we get our cash value in return through declared bonuses. Generally, there are termed as Reversionary Bonus and Terminal Bonus.

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Reversionary Bonus and Terminal Bonus Singapore

Different insurance companies may give a different rate of bonus to their policyholders. This is usually based on the sum assured in the policy. As always, the higher the rate, the more money that you get.

Also, take note that the compounding rate may differ too.

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What is Compound Interest?

Smoothing of Bonuses

Some of the insurance plans adopt the concept of smoothing of bonuses in order to give the same rate of returns to the policyholder.

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Smoothing of Bonuses Singapore

In order for smoothing of bonuses to work, the insurance company's participating fund must have proper track records and returns over time. Otherwise, there is simply nothing much that the fund can give to its policyholder.

For example, here is the latest result from AIA: https://www.blog.pzl.sg/aia-singapore-participa...

So how?

All in all, I have highlighted some of the key points to look out for when choosing a good savings policy that is capable of providing a stable rate of return over time. On balance, track records is one of the best thing to look out for since the future will always be uncertain. As such, I believe AIA Singapore checks the boxes.

That being said, comprehensive financial planning is required in order to give you the right financial advice on which type of planning is able to give you the flexibility and return that you need.

Here is everything about me and what I do best.

Hi Anon,

Based on your needs, I believe that every insurer does have similar plans for you. Just wondering how long a maturity period are you comfortable with?

If you do not mind a presentation on what is possible for you from me, do reach out, there is no obligation on your end of course. My email is [email protected]