Which savings/endowment plans is the best right now? I was told on PruWealth but are there any better ones out there? - Seedly
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Anonymous

Asked 2w ago

Which savings/endowment plans is the best right now? I was told on PruWealth but are there any better ones out there?

What other good endowment/savings plans are out there that I should be considering? how do they match up against PruWealth?

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Hi anon,

You'll need to understand what your needs are, before deciding if a saving or endowment plan is the right instrument in the first place.

If you were looking for

  • A risk free guaranteed return after a number of years

  • Potential upside capital appreciation without exposure to your down side

  • A disciplined way to set aside money for your future use

Then an endowment plan may the investment vehicle for you to consider.

Naturally there are many types of endowment plans. In this instance, PruWealth is a perpetual endowment, meaning that you'll set aside money for a number of years, and then the plan will continue to grow your monies as long as the life assured lives. At any point during the policy, you can choose to withdraw your monies (all or part of it). Contrast this with a fixed-term endowment whereby the returns are returned to you at the end of the fixed-term and the plan ceases there after.

Now, if this type of structure is what you are looking for, then you'll want to compare a number of features. For example

  • Guaranteed returns after 15, 20, 25 years, etc. The guaranteed return is an extremely important factor to note as the insurer has to deliver this regardless of market condition. This gives you an idea of the worst case scenario.

  • Potential non-guaranteed return. Again, the higher the better. Consider this the best case scenario

  • Riders that may prevent ensure the purpose of the plan is maintained. For example, a sole breadwinner parent buying a plan for children's education (policy owner: parent, life assured: child). With a payor benefit waiver rider, should the parent pass on during the premium paying duration, the plan will still carry on, ensuring that its intention of providing for the child's education fund is fulfilled even though there is no one earning an income to pay for the plan any more

  • Any other special benefits; for example, some plans may have a lump sum payout upon certain key events being reached (e.g. entry to university, marriage, etc), and such payouts will not impact the surrender value of the plan

As you can see, there are quite a number of factors to consider, so you will want to sit down with an independent financial advisor for an in depth discussion. There are many plans similar to PruWealth, such as Manulife's ReadyBuilder, or AIA's Swart Wealth Builder, or Aviva's MyLifeSavings plan. Take some time to understand your options.

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Hi Anon,

Whether a product is the best or not really depends on your needs and also the time horizon you are looking at.

Yes, in regards to what Prudential has to offer, it is currently the best endowment plan available, as it gives the highest potential in terms of returns from an endowment policy due to it having a maturity age of 100 years and giving you the flexibility to draw down the cash value after 20years.

If that fits what your needs are, then yes, this is the most ideal product if you are looking for a long term endowment policy with good returns.

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峻豪
峻豪
Level 4. Prodigy
Answered 1w ago

There are a lot of vehicles with decent interest rates, but you may have to meet certain requirements. It's just depends what requirements you can easily meet. Personally not a fan of endowment plans.

There is SCB Jumpstart which gives 2% for first 20K as long as you are below 26. There is Singlife which gives 2.5% for first 10K. Both are very flexible vehicles. CIMB fastsaver gives you decent interest rates without meeting much requirements too.

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It depends on your objective and your definition of "better". Let me give me a breakdown on some of the key fundamentals that you should know:

Participating Policy

Generally, endowment savings plan are participating policies. As a result, your money is invested into the insurance company's participating fund. With this in mind, it will be good to understand on how a participating fund works.

More Details:

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.

More Details:

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.

More Details:

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.

More Details:

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 Singapore: https://www.blog.pzl.sg/aia-singapore-participating-fund-update-2018/

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.

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