Next week, AIA will be launching the S$ 2Pay5 plan, a 5-year non-participating, limited 2-year pay product (Edit: The plan has been launched already).
How it works is that you will need to pay annual premiums for two years, and then receive a lump sum payout at the end of five years.
The plan offers a guaranteed yield ranging from between 2% to 2.2% depending on the annual premium amount.
- 2.00% : $5,000 - $9,500
- 2.10% : $10,000 - $14,500
- 2.15% : $15,000 - $24,500
- 2.20% : $25,000 onwards
For example, if your annual premium is $10k, your maturity benefit will be
10000 x 1.021 x 1.021 x 1.021 x 1.021 x 1.021 + 10000 x 1.021 x 1.021 x 1.021 x 1.021 = $21961
Suitable Market
Individuals who require a guaranteed return of 2% over 5 years and does not have any immediate cash needs.
Unsuitable Market
Individuals who want short term liquidity.
Risks of the product
- Surrender penalty upon early withdrawal
- Automatic surrender due to non-payment of 2nd annual premium
The death benefit of this plan is the higher of total premiums paid (excluding advance premiums, if any) and the cash surrender value
The plan also provides for an additional 10% accidental death benefit in the first policy year.
If you are interested in this plan, you can contact me here.
8 comments
Daniel says:
July 30, 2010 at 10:46 am (UTC 8)
hi,
This plan does not suit current inflation environment of 3.5%. Going forward with economies around the globe picking up, it does not make sense to set aside the amount for 5 years. As Independent Financial Adviser, what will you suggest with investment of such amount and time frame?
lioninvestor says:
August 3, 2010 at 12:18 pm (UTC 8)
Hi Daniel,
Every individual has a different risk profile and objectives therefore I don’t really have a standard answer to your question.
For example, a “buy STI ETF” formula might not necessarily work for everyone.
Some people will end up buying high and selling low.
Even if they RSP, past experience has shown that some people will halt the RSP just when prices are low!
Singaporean says:
August 1, 2010 at 1:41 am (UTC 8)
What happens if AIA goes bust 4 years from now? Is the sum insured insured?
lioninvestor says:
August 3, 2010 at 12:12 pm (UTC 8)
Hi Singaporean,
If an insurer goes bust, then the policy owners protection fund will come in.
http://www.martinlee.sg/policy-owners-protection-fund-consultation-paper/
Jasmin says:
August 2, 2010 at 10:22 am (UTC 8)
I am more worried about going bust than beating the inflation.
lioninvestor says:
August 3, 2010 at 12:18 pm (UTC 8)
Hi Jasmin,
Fair enough. If you have no faith in the organisation, then don’t touch their products.
Kyra Lau says:
August 5, 2010 at 8:24 pm (UTC 8)
Qn: Can I use my SRS Account to purchase this plan?
lioninvestor says:
August 6, 2010 at 10:37 am (UTC 8)
Hi Kyra,
This plan is cash only.