Monday, April 7, 2008
There are many people in my blog criticizing the Growth Plan from NTUC Income. I had also rejected some of the comments because the language used to scold NTUC Income advisers was unacceptable and uncalled for.
What exactly is this Growth Plan about? I like to first proclaim that my blog have nothing to do with NTUC Income, hence you can be assured that my view is independent and unbias.
Growth Policy is a Single Premium Endowment plan
Shortest Term - 5 yrs
Minimum Premium - $5,000
* Maturity Cash value consist of Guaranteed and Non-guaranteed portion
* Sum Assured covers Death and PTD and is doubled in event of accidental death.
* As a special privilege, surrender value = single premium after policy in-force over 12 months. This special privilege is not guaranteed and subjected to Life Insurance Fund actual experience.
Single Premium - $10,000 x 10 yrs
Sum Assured - $12,238.60
Guaranteed Returns - $12,239
Non Guaranteed Returns - $2,624
Total Projected Returns - $14,863
Yield - 4.04% p.a basis 5.25% projected IRR
Real Yield for a 10,000 x 10yrs Growth Plan that matured in 2007 - 4.92%
So what are the criticism?
1) Returns are non-guaranteed and if policyholder use the money for investment, the returns will be higher.
2) There are advisers recommending Growth Plan for Special Account
3) There are advisers recommending Growth Plan for the initial $20k of Ordinary Account
How I feel about it on above 3 critics?
1) I agree that returns are not guaranteed and investment returns are generally better. But there are truly people out there who die die don't want to invest.
*They want a better returns compared to bank deposits. They don't mind locking up this fund for next 5 or 10 years.
* The Ordinary account in excess of $20k is also okay in this plan for same group of people who simply cannot be convinced into investment.
* I don't see anything wrong for such group of people who are satisfied and happy with it.
2) My commentors claim that there are many advisers recommending Growth Plan for client's Special Account.
* I agree that this is not recommended because Risk free returns for Special Account is around 4% and Growth Plan returns are only semi-guaranteed less than 0.1% higher.
* I don't know how these commentors claim they saw many NTUC Income advisers doing this? I have no idea where they see it.
* From my understanding, advisers will have a hard time justifying their recommendation for approval under strict MAS guidelines.
3) There are some advisers recommending Growth Plan for the initial $20k of Ordinary Account. This option is somehow like at the tip of the fence. Either side looks equally okay.
* However, I will not recommend this option because the guaranteed returns is 3.5%. Projected returns of Growth Plan is barely 0.5% higher.
* This 0.5% higher returns is not guaranteed and is in exchange for the opportunity cost of using this fund for other purposes such as mortgage repayment liquidity or Children Education, etc.
Above is my view. If anyone wish to comment, pls comment constructively and no vulgarities please.
at 1:11 AM