OCBC Bank and Great Eastern: Single premium non-participating endowment plan with a five-year policy term
To celebrate Singapore's Golden Jubilee, OCBC Bank and insurer Great Eastern have launched a five-year single premium plan that offers a guaranteed payout of 2 per cent every year.
The total premium paid is guaranteed at maturity, and you can pay a minimum premium of $20,000, and choose from two payout options.
OCBC gives two examples based on a premium of $100,000.
The first option lets you withdraw the guaranteed annual payout every year.
At the end of the first year and until the end of the fourth year, you get an annual guaranteed sum of $2,000. At the end of the fifth year, you get the guaranteed annual sum of $2,000, and the total premium paid, which is $100,000.
This means that the total guaranteed amount you get over five years is $110,000, which would translate into a yield of 2 per cent a year.
You can also choose the second option to accumulate your guaranteed annual payouts, and withdraw a lump sum only at the end of five years.
This means that you don't withdraw your annual payouts for five years, and they are accumulated with Great Eastern.
The accumulation is based on a prevailing interest rate of 3 per cent, which is subject to change by Great Eastern.
At the end of the plan, you get a guaranteed sum of $110,000, and another $618. This would work out to a maturity yield of 2.04 per cent a year, based on the prevailing interest rate.
Great Eastern notes: "Buying a life insurance policy can be a long-term commitment. An early termination of the policy usually involves high costs, and the surrender value may be less than the total premium paid."
AIA: The enhanced AIA Retirement Saver (II)
AIA Singapore has launched a new retirement product that gives you the option of guaranteed acceptance for major cancer coverage, with no questions asked and no medical checks required.
You can add on the cancer relief income rider, which pays income upon a major cancer diagnosis, even before you retire.
This additional stream of income can help defray medical treatment fees, or supplement your basic retirement plan's premium, so your retirement plan can continue.
When you retire, you will get money from two streams. One will be your retirement income, and the other will be continued cancer relief income all the way until your retirement plan matures.
Mr Alfred Chia, the chief executive of financial advisory firm SingCapital, points out that, even though the cancer relief income rider is an interesting feature that is good to have, and without any medical underwriting, the "additional premium will erode the returns for the retirement funds".
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MEETING YOUR NEEDS
Mr Chia notes: "An endowment plan is an effective saving plan for the low-risk type of investor as insurance firms offer guaranteed and non-guaranteed cash values.
"Naturally, the return will be lower than for the equity type of investments, but certainly much higher than bank deposit rates."
Before buying such products, consumers should consider if they are doing so for retirement planning or as protection, he says.
He says: "If you want to save $500,000 in 20 years, and if your saving plan can generate a 3 per cent return, you need to put aside around $1,520 a month.
"If your investment plan - which involves taking higher investment risk - can generate 6 per cent returns, you need to put aside only about $1,077 per month. But before you jump on the second option, you need to establish your investment risk profile, to see whether you can stomach the investment volatility."
He says such products by AIA offer an option for those who want to mix and match tools for their retirement plans, but they must still consider if the products meet their needs.