NTUC recently launched their DreamSaver product, a regular premium participating endowment plan with a policy term of 8 or 10 years and a limited premium paying term of 5 years.
How it works is that you pay premiums for the first five years of the plan, and then you will receive a monthly cash coupon equal to the size of your monthly premiums from the sixth year onwards. If you deposit the cash coupons with NTUC, you will be able to earn a non-guaranteed interest of 3.5% p.a. on the coupons.
The minimum monthly premium for this plan is $500.
Let’s cut to the chase and look at the actual rate of return of the DreamSaver plan.
The 10-year plan will be used as an illustration. For the highest return, the cash coupons should be deposited with NTUC to earn the higher interest.
Total premiums paid : $500 x 12 x 5 = $30,000
Total guaranteed maturity proceeds : $30,250
Internal rate of return (IRR) based on guaranteed portion : 0.11% p.a.
Projected maturity proceeds if par fund performs at 3.75%: $35,191
IRR based on this projected return : 2.13% p.a.
Projected maturity proceeds if par fund performs at 5.24%: $37,691
IRR based on this projected return : 3.06% p.a.
I will leave it to you to give your verdict on this plan. 🙂