Pruwealth min premium?

Lewis.T

Senior Member
Joined
Apr 17, 2014
Messages
1,143
Reaction score
0
Basically, if the fund grows 4.75%, the investor gets 3.26% or 3.87% and Prudential takes the rest. If the fund grows 10%, Prudential has not said how much it will give to investor and what it will keep for itself. Meaning it could give the investor 5% only if it wanted -> easy way to backtest, look for the years the fund grew more than 10% - how much bonus was given to the investor.

You are not wrong, insurance is a business model after all. But there are regulations in place to safeguard the interests of policy holders

http://www.moneysense.gov.sg/Understanding-Financial-Products/Insurance/Types-of-Insurance/Life-insurance/Types-of-Life-Insurance/Participating-Policies.aspx said:
What safeguards are there to protect policyholders?

The profit that can be paid to shareholders of the insurance company is limited to a maximum of 1/9th of the value of bonuses allocated to participating policyholders. This means for every $9 distributed to policyholders, a maximum of $1 is distributable to shareholders.

If there is any shortfall in the assets needed to meet the guaranteed benefits of policyholders, the shortfall must be met by shareholders. The insurer must pay the guaranteed benefits even if the participating sub-fund performs badly.


One can compare to TM VIP Infinite, which has no dividends for the first 5 years, but year 6 onwards, will give bonus of 4% if fund grows 4.75%. But the same reservation applies. If the fund grows 10%, do you get most of this, or does the insurer only give you a much smaller bonus and keep the rest?

You are comparing a single premium plan to a regular premium plan. If you have the money in a lump sum, a single premium plan will do better for you growth wise. It only makes sense for it to.

Compare to buying your own ETF, if STI grows 10%, you get to keep all the gains.

Yup, but there's a reason you can't convince everybody to do so. People have different risk appetites. Some people prefer the stability of a capital guaranteed product and modest returns, such as PruWealth, while others do not mind the risk and have the time horizon to invest in things like the STI ETF. You will be hard pressed to convince someone with a conservative mindset to follow your 'right' way.

Lastly, we have, and have been declaring additional bonuses on years that the fund performs well. Policy holder and policy number have been omitted for obvious reasons.

28ujraq.jpg
 
Last edited:

Keverus

Banned
Joined
Aug 30, 2008
Messages
80,612
Reaction score
0
The profit that can be paid to shareholders of the insurance company is limited to a maximum of 1/9th of the value of bonuses allocated to participating policyholders. This means for every $9 distributed to policyholders, a maximum of $1 is distributable to shareholders.

interesting.....
 

limster

Arch-Supremacy Member
Joined
Oct 31, 2000
Messages
11,421
Reaction score
2,431
thanks for the useful information.

Long ago, insurers could give 4-5% CAGR, then came along high-price products giving 2-3% CAGR and some cases even 0% CAGR. All this nonsense gave insurers a bad name (I had a relative whose ILP matured with 0% CAGR, won't name the insurer, but investmentmoats also has example of such policies).

Good to see new products where returns are coming closer to 4% CAGR.

I have nothing against insurance policies as long as the terms are fair and attractive to consumers. In fact, some insurance companies Pru included might make good dividend stocks if they are so successful in managing their participating fund....
 

AhPek_Lion

Supremacy Member
Joined
May 20, 2008
Messages
9,808
Reaction score
0
Take note that funds performing at 5.2% does not translate to policy holders getting 5.2%.

Edit: To give you more info, PruWealth of a 20 year premium term are giving projected values of 3.26% CAGR at year 20.

PruWealth of a 5 year premium term are giving projected values of 3.87% CAGR at year 20.

It is impt for the agent to explain what u said abt the 5.2%. Cos most agents will conveniently say that over the past 10yrs it has been performing at 5.2% but they omit the part on how this 5.2% translate to bonuses for the client.
 

Perisher

Greater Supremacy Member
Deluxe Member
Joined
Jan 5, 2015
Messages
84,276
Reaction score
10,137
It is impt for the agent to explain what u said abt the 5.2%. Cos most agents will conveniently say that over the past 10yrs it has been performing at 5.2% but they omit the part on how this 5.2% translate to bonuses for the client.

This.
The 5.2% is meaningless... the most important one is how much one actually gets. And that should be the % marketed, not the 5.2%.
 

Lewis.T

Senior Member
Joined
Apr 17, 2014
Messages
1,143
Reaction score
0
I'm not sure who marketed it as a 5.2% product, but I think I've been pretty clear with my explanations.
 

Meng Yee

Junior Member
Joined
Jun 14, 2014
Messages
5
Reaction score
0
Thanks for the explanation Lewis. :)

To address some queries, Pruwealth isn't marketed as a 5.2% instrument. All Pruwealth brochures assume 4.75% for illustration, which is the upper limit in BIs for such policies, as per regulations. However, there will be some clients keen in finding out if 4.75% is achievable, which is where knowing past actual annualized returns comes into play. For past 10 years, it has averaged 5.2%. Of course this does not mean future performance will be the same. Returns enjoyed by clients depend on both the performance of the underlying fund, as well as distribution costs, which are closely monitored by government bodies. Like Lewis mentioned, there is a cap on profits issued to shareholders of insurance companies, so that there is no exploitation.

Also, notice that projected benefits in BIs have already factored in effect of deductions. Hence, clients can get more accurate depictions of how much money they could potentially get with similar actual fund performance.
 

dendii

Senior Member
Joined
Aug 11, 2016
Messages
628
Reaction score
0
4.75% is not the return client expects to get.

It is the return of the insurer so you need to work out the actual return yourself, which usually might be equivalent to minus-ing away 1.5-2.5% of the actual return.

I think alot of people are confused about the projections under the illustration. Please dont be mistaken.

As if other insurers stick to IRR of 4.75 as projected.
 

dkgamer

Member
Joined
Dec 23, 2007
Messages
204
Reaction score
0
i am well aware that i have to work it out myself. but i am confused why they dont simply just list down the actual irr in big bold numbers next to the projections. why make it so difficult for uninformed customers?
 

akwl88

Arch-Supremacy Member
Joined
Feb 15, 2016
Messages
10,696
Reaction score
1
i am well aware that i have to work it out myself. but i am confused why they dont simply just list down the actual irr in big bold numbers next to the projections. why make it so difficult for uninformed customers?

Because they cannot guranteed the returns of their investment.

They play along the grey area and agents take advantage of it.

Usual tactic employed includes past returns close to the projected % but cannot guranteed.

See liao also arm chio

In short, if the guranteed value is less than your total premiums paid by at least 5% or more if the holding period is longer, the product is useless and served only to benefit the agent if he/she managed to sell.
 

anfielder

Master Member
Joined
Sep 16, 2005
Messages
4,554
Reaction score
1
i am well aware that i have to work it out myself. but i am confused why they dont simply just list down the actual irr in big bold numbers next to the projections. why make it so difficult for uninformed customers?

Because they're hoping that you will buy without doing your own due diligence.
 

dkgamer

Member
Joined
Dec 23, 2007
Messages
204
Reaction score
0
they take the trouble to make a 38 page document with all those projections and table of deductions but cannot find the time to list down the actual irr. clever right.
 

akwl88

Arch-Supremacy Member
Joined
Feb 15, 2016
Messages
10,696
Reaction score
1
they take the trouble to make a 38 page document with all those projections and table of deductions but cannot find the time to list down the actual irr. clever right.

If cannot convince, confuse instead :)
 

Shion

Senior Mentor
Joined
Oct 24, 2008
Messages
320,258
Reaction score
80,680
Gone were the days where insurers manage double-digit % on their par fund performance ?

For the past 10 years since 2008 financial meltdown, the best performance was in 2012
 

akwl88

Arch-Supremacy Member
Joined
Feb 15, 2016
Messages
10,696
Reaction score
1
Gone were the days where insurers manage double-digit % on their par fund performance ?

For the past 10 years since 2008 financial meltdown, the best performance was in 2012

wasting too much money on incentive trips and monthly award ceremonies in 5 star hotels

insurers are still not catching up on the new economy and reining in their costs
 
Important Forum Advisory Note
This forum is moderated by volunteer moderators who will react only to members' feedback on posts. Moderators are not employees or representatives of HWZ. Forum members and moderators are responsible for their own posts.

Please refer to our Community Guidelines and Standards, Terms of Service and Member T&Cs for more information.
Top