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.
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