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NTUC Wealth Solitaire
24 Jul 2020 (388 views)

A FISCA member sent this brochure for my analysis. The financial adviser recommended that he take a loan from a bank for 70% of the single premium to buy this policy. He only needed to put out 30%. The interest rate on the loan is currently about 1% per annum. 

Here is the brochure of the NTUC Wealth Solitaire plan.
https://s3.tklcloud.com/T99/200724132402057_NTUC%20Wealth%20Solitaire%20Brochure.pdf

TKL analysis of Wealth Solitaire Plan
You invest a single premium of $X.

The income from the first 5 years is taken away by the insurer, probably to pay the commission to the agent and to keep some as their profit.

Assume that the return is 4.75% p.a. The amount taken away for 5 years is more than 20% of the single premium.

From the 6th year, you will get a return of y% which is 0.55% less than what the life insurance fund earns. 

The projection of 4.75% is probably realistic, so you can get the 4.2%.

The cash benefit payables on the 21st and 31st year amount to 3.1% of the single premium. 

So, the benefit is about 0.1% per year. It comes out of the 1.25% margin that is taken away each year.

The centennial bonus is payable only for people who survive to 100 years. Most people will not get this benefit, but perhaps a small proportion will.

The terminal bonus is not guaranteed. I do not know how the figure is arrived at. I am not able to give a value to it.

The question that you have to consider is - are you able to invest in another type of investment that gives a better return than 4.2% per annum
over the long term?

I suggest that you invest in the STI ETF (exchange traded fund). It is likely to give a return of 5% p.a on average in the future. 

The average return over the past 20 years was probably between 6% and 7%.
The STI ETF is invested in 30 blue chip shares. 

The annual fee is 0.3% p.a., so you are likely to get an average return, over the long term of 4.7%. This is better than 4.2% payable under the Wealth Solitaire plan. You do not suffer the forfeiture of the return for the first five years.

I do not recommend you to take the loan from the bank.

The current rate of interest is about 1%. However, it is not guaranteed and can increase sharply when the economic situation changes.

During the Asian financial crisis in 1996, I have seen interest rate jumped from 2% to 25% p.a. I do not know if a similar crisis may recur in the future. 

I always advised people - NEVER INVEST WITH BORROWED MONEY.  Invest your spare cash - money that you can invest for the long term.

Tan Kin Lian 
 


NTUC Wealth Solitaire
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A FISCA member sent this brochure for my analysis. The financial adviser recommended that he take a loan from a bank for 70% of the single premium to buy this policy. He only needed to put out 30%. The interest rate on the loan is currently about 1% per annum. 

Here is the brochure of the NTUC Wealth Solitaire plan.
https://s3.tklcloud.com/T99/200724132402057_NTUC%20Wealth%20Solitaire%20Brochure.pdf

TKL analysis of Wealth Solitaire Plan
You invest a single premium of $X.

The income from the first 5 years is taken away by the insurer, probably to pay the commission to the agent and to keep some as their profit.

Assume that the return is 4.75% p.a. The amount taken away for 5 years is more than 20% of the single premium.

From the 6th year, you will get a return of y% which is 0.55% less than what the life insurance fund earns. 

The projection of 4.75% is probably realistic, so you can get the 4.2%.

The cash benefit payables on the 21st and 31st year amount to 3.1% of the single premium. 

So, the benefit is about 0.1% per year. It comes out of the 1.25% margin that is taken away each year.

The centennial bonus is payable only for people who survive to 100 years. Most people will not get this benefit, but perhaps a small proportion will.

The terminal bonus is not guaranteed. I do not know how the figure is arrived at. I am not able to give a value to it.

The question that you have to consider is - are you able to invest in another type of investment that gives a better return than 4.2% per annum
over the long term?

I suggest that you invest in the STI ETF (exchange traded fund). It is likely to give a return of 5% p.a on average in the future. 

The average return over the past 20 years was probably between 6% and 7%.
The STI ETF is invested in 30 blue chip shares. 

The annual fee is 0.3% p.a., so you are likely to get an average return, over the long term of 4.7%. This is better than 4.2% payable under the Wealth Solitaire plan. You do not suffer the forfeiture of the return for the first five years.

I do not recommend you to take the loan from the bank.

The current rate of interest is about 1%. However, it is not guaranteed and can increase sharply when the economic situation changes.

During the Asian financial crisis in 1996, I have seen interest rate jumped from 2% to 25% p.a. I do not know if a similar crisis may recur in the future. 

I always advised people - NEVER INVEST WITH BORROWED MONEY.  Invest your spare cash - money that you can invest for the long term.

Tan Kin Lian