1. What is this plan
Technically, it is an investment-linked plan that invests your savings in a money market fund. But to you, it may look more like a savings account that pays high interest.
But like a savings account, you can withdraw your money at any time. You are not locked in for one or two years, with a penalty for early withdrawal.
Flexi-Cash is a safe investment that pays a high rate of interest.
2. What is the expected return?
The current return on the money market is about 3.3%. After deducting 0.25% per annum for this fund, the net return to the investor is likely to be slightly more than 3%.
As the return on the money market is a floating rate, the return on this plan will also fluctuate. As interest rate is likely to increase in the near future, the return on this plan will similarly improve. You enjoy an attractive, floating rate. You are not locked in to the current rate for one year or longer.
It is possible that interest rate may come down some time in the future. The return from the fund will reduce accordingly.
3. What is the upfront spread and annual fee?
The spread is 0.25%. It is much lower than the spread for equity or bond funds, which vary from 3.5% to 5%.
During the promotion period (ie for the launch of this product), the spread is reduced to 0.1%. Yes, it is just one-tenth of 1 percent.
The annual fee is 0.25 %. It is subtracted from the inter-bank yield. You will be paid the difference, which is now about 3 %.
4. Is there any penalty on withdrawal?
There is no penalty. You can withdraw your savings at any time, based on the bid price (ie net asset value) of the money market fund.
The net asset value should be quite close to your invested capital, less the upfront spread (of only 0.1% during the promotion period), plus the interest earned on the money market (less the annual charge of 0.25%). This is almost like getting an interest rate of 3% on your savings.
5. What is the minimum amount of investment?
For an initial investment, the minimum is $5,000. For topping up
and withdrawal, the minimum is $500.
6. Are the fees subject to change?
Yes. We will give at least 30 days notice of any change. We are likely to
change the initial spread to 0.25% after the promotion period.
We will try to keep the annual fee to the very low rate of 0.25%.
We will only increase it in the future, if the fee is insufficient to meet our
operating expenses, and the interest rate on the money market
Our aim is to give an net return that is attractive to our policyholders,
and higher than other types of similar investments.
7. What is the risk of losing my capital?
The risk is very small, almost negligible. The fund is invested in the
interbank market. The borrowers of the funds are the banks. A small
portion is invested in A-rated floating rate notes issued by corporate
bodies. As the rating is A or better, the risk of loss is quite small.
8. Is there any capital guarantee?
The basic product does not come with any capital guarantee.
The investor can buy a capital guarantee separately at the cost of 0.5%
per annum. By paying this cost, the investor is guaranteed that the
principal at the end of 12 months will not be lower than the principal at
the start of the guarantee period.
Effectively this reduces the return by 0.5%. So, if the return is 3%, the
net return after paying for the guarantee is 2.5%.
In my view, there is no need to buy this guarantee, as the risk is
negligible. Even if there is a loss, the amount of capital loss will be
9. Is there any insurance cover?
The basic policy provides a very nominal insurance cover.
It guarantee that in the event of death, the sum assured will not be lower
than the amount that has been invested. This means that any capital loss
(which is most unlikely) will be insured in the event of death.
If you wish to buy additional cover, we recommend that it be purchased
through a separate low cost term assurance plan.
10. How do I buy this plan?
You can come to our insurance business center (located at Bras Basah Road
and Tampoines Point). You can also see our insurance adviser.
Tentatively, the plan will be available from 1 June 2006.
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