Why is the guaranteed sum at maturity date less than the projected total premium paid at maturity for PruFlexiCash (7th Series)?

Hi anon,

For plans with flexibility of taking out part of your funds after a few years (like PruFlexiCash), there is naturally a trade-off, as there needs to be liquidity in the plan to allow for withdrawals, which will result in a lower guaranteed amount at maturity. These are cashback plans, or plans with coupon. Plans that don't have this feature will generally have a better guaranteed yield, such as your traditional vanilla endowment.

Yes, there are plans whereby the guaranteed sum is lower than the basic premium paid at maturity, especially so for cash back plans. Most insurance companies have some kind of cashback plan, and so far the best I've seen is slightly better than capital guaranteed, around 0.5% p.a. Most cashback plans I've seen usually have guaranteed maturity amounts lower than premiums paid.

For your traditional vanilla endowment, yields will be better, I have seen 2+% guaranteed. This means that your guaranteed amount is definitely more than your premiums paid, before even considering the non-guaranteed amount.

It really depends on whether you need the flexibility of the regular withdrawals, or if you prefer to be disciplined and just set aside money to draw on it much later. That's why both plans exist to serve different needs. However for myself, if I want to save with flexibility to spend, I would skip a cashback endowment and put my money in a savings account or similar, and if I wanted to prepare a sum of money for the future (say for children's education) then I would just get a traditional vanilla endowment or lifetime endowment plan.

To know about other similar plans you can consider speaking to an independent financial advisor who can advise you on what plans are available, whether it be a cashback endowment, traditional endowment, or lifetime endowment plan.​​​

A large reason is the flexibility from withdrawing from the policy after the second year. The flexibility to withdraw is different from a plain vanilla endowment policy - where withdrawals will be treated as as policy loan and need to be repaid with interest. As such, the guarantee is lower to provide for the facility.

There are other plans from Prudential as well as other insurers where the guaranteed component is higher than the total premium paid.