Dear Sir,
I wish to seek your advice on the MyRetirement policy by Aviva being sold in DBS. My wife and i are actively searching for places to grow our nest egg in order to retire comfortably. We were enticed into the DBS branch at IMM and it seem a deal too good to be true.
It is a "8-pay" endowment policy whereby, we will have to pay monthly or annually a premium for a total of 8 years. After which, we will not have to pay any more and it is this period when we dont pay till our retirement age, 50, 55, 60, 65. It seems the later we claim back our policy, the lessen a premium we pay.
Our policy was like, we pay monthly 833 for 8 years and we will get a payout of 1,000 monthly for 10years from 50-60, 55-65. there is also a lump sum payout after that.
Can you help to advise if the policy is worth considering? If all these savings and endowments are not useful, can you help to point us to the right investment direction? Many thanks !
REPLY
You can use an Excel spreadsheet to calculate how much your money will earn for you if you are able to earn a yield of 4% on your investments. You can credit your yearly savings with interest at 4% and draw out the payout yearly based on the illustration giveny by Aviva. If there is still remaining money after the last payout, it means that you can get a better outcome by investing on your own to earn 4%.
To learn about a better way to invest the money, you can attend the talks given by FISCA, http://easyapps.sg/
7 comments:
This is a crap endowment product. You can do with unit trust giving MUCH better return.
Example: investment monthly for 8 years and stop and draw down whenever you want instead of of being dictated by the term of the contract.You can save for whatever term you like and not jsut 8 years and decide when to withdraw.
Of course, to receive the same payouts the 'premium' is lower with longer investment period.
Don't be fooled by those crap retirement products in the market. They are rubbish endowment products.
There is always the risk and return factor in every investment/saving tool. It may be crap to some or a good saving product to others. Spreading of risk, duration, needs, overall current portfolio are just some factors to consider for retirement planning.
You need supreme guidance in this case. And one more thing from now on always invest wisely.
People think that endwoment products have no risk. This is a mistaken view.ALL insurance products, wholelife or endowment have risks.
The worse risk is not achieving your goals.
I have just analysed the benefit illustration and saw a feature that is quite worrisome to the consumer.
During the first 17 years (when premiums are payable), the yield is almost nil. You are paying a premium and getting no return at all, if the plan is terminated. All the interest earned is lost.
For the next 4 years, the illustration showed a big jump in the non-guaranteed values to give a yield of 11% per annum. At the end of 21 years, the surrender value looks reaonsable, but they are based almost entirely on non-guaranteed values.
There is a risk that the non-guarnteed value will NOT BE PAID, as it is not guaranteed, and the consumer may get almost no return.
The monthly payout comes after that. I am not clear how it works and what the residual value is.
As a large part of the eventual benefit is NOT GUARANTEED, and the operation is quite obscure, I advise the consumer to AVOID THIS PLAN.
May I ask what is guaranteed nowadays? Even sovereigns can default not to mention big banks with a 150 year history. Its all about risk management. Don't put all your eggs in one basket is the first thing one should think of!
Hi Mr Tan Kin Lian,
I believe you know that your blog and views are of the highest regards in the financial industry today. I would like to ask with your negative comments on all the plans in the market, what should I invest then? And also, what is your investment returns so far? With your belief in saving on insurance cost and invest yourself, are you right now a multi millionaire?
Regards
your faithful reader
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