Comments abt Prudential heritage

[quarkz]

Hi,

my insurance friend recommended this to me, saying it's the best plan out there, especially for very small kids, but i'm not too sure.

https://www.prudential.com.sg/corp/prudential_en_sg/solutions/invest/PRUlink_heritage_account.html

From what I remembered, he says:

1. Protection is 40 times the premium, minimum $5k per year
2. If I buy for my baby, we can stop paying after 3 years, and he can still enjoy the permanent illness, death etc protection for the rest of his life.
3. I'll start getting at least 5% cashback from the 4th yr, and 7% from the 11th year onwards.
4. Money can be taken out anytime, as long as $5k still inside for the life, death insurance to be valid, until the person dies.
5. Due to unbelievable offer, there are no gift allocating for buying this package.

So is it really that good, such that the company is not earning money? Also no gift is allocated.

Can someone comment on it? I'm thinking of buying for my baby. Thanks.

 

[MultiplyYourWealth]

I'm not aware that Prudential has became a social enterprise. Why would they come out with something that does not generates profits?

This is a typical ILP with its units subjected to the performance of the underlying funds. Mortality or assurance cost is deducted from the units. When the underlying funds perform poorly, the policy might lapse. With only 3 years of payment, you might want to check if it can sustain for the entire life.

I don't think 'cashback' is the appropriate word here. Those 5% & 7% are extra unit allocated if you continue to pay the premiums after the 4th and 10th year respectively. If you stop paying after 3 years, it does not apply.

Ask him for the first 3 years allocation and see what his answer is.

 

[Aerial86]

What Multiply said is right. Plans like Heritage usually link up with funds that we called "accredited investor funds" which is not available in retail fund markets. These are funds that Higher net worth individuals go into and the criteria to access them is not easy.

In order for retail investor to tap into them, companies came up with such policies to create the bridge across, in return investor has to be tei down by a contract over a certain period of years. Correct me if I'm wrong to think that Heritage works this way.

It might be good to also see if the underlying funds of Pru heritage are AI funds or not. If it's not, I would rather you invest in funds outside rather than going into ILP.

 

[Shiny Things]

What Multiply said is right. Plans like Heritage usually link up with funds that we called "accredited investor funds" which is not available in retail fund markets. These are funds that Higher net worth individuals go into and the criteria to access them is not easy.

In order for retail investor to tap into them, companies came up with such policies to create the bridge across, in return investor has to be tei down by a contract over a certain period of years. Correct me if I'm wrong to think that Heritage works this way.

It might be good to also see if the underlying funds of Pru heritage are AI funds or not. If it's not, I would rather you invest in funds outside rather than going into ILP.

Naaah, not true. Firstly, the whole thing about "Accredited Investor" funds is kind of rubbish anyway - it's just marketing to make people feel special. If you invest more money, you usually get access to a lower-cost class of shares (most notably the super-insto classes of Vanguard's funds, which have nine-figure minimums but charge just two basis points) but I can't find any funds on that Prudential list that have meaningful minimums. The insurance companies just say that to make you think you're getting something for the huge fees you pay.

But who says you need to pay massive fees anyway? Let's take a look at the Cheapass Guide To Getting Into Expensive Funds.

I'm gonna use the PruLink GEMM Resources Fund as an example, because that's the first one on this list and I'm lazy. Anyway.

Here's the PruLink fund's fact sheet. It turns out it's just a wrapper around the JP Morgan Asset Management Global Natural Resources Fund.

You pay 5% upfront and 1.5% per annum to buy the Eastspring wrapper fund, and the JPM fund charges 0.8% per annum for the absolute cheapest class of shares - so that's a total of 5% upfront and 2.3% running, over and above whatever you might pay for the crappy-ass insurance wrapper.

So here's where it gets good. What if I told you you could get that fund for 90% off? Epic lobang am I right?

One of the nifty tools that Interactive Brokers gives you is the "Mutual Fund Replicator" tool. It looks at any American mutual fund (like the Global Natural Resources fund), and tells you how to replicate that fund's performance with a portfolio of cheaper ETFs.

And it tells me that instead of buying $1000 worth of the JGNCX mutual fund, you can buy $1000 worth of PICK (the iShares Metals and Mining Producers ETF, apparently). They hold most of the same shares (the top holdings in both funds are BHP, Rio, Anglo, Freeport McMoran, and Glencore Xstrata); their performance is 89% correlated; but one charges 5% upfront and 2.3% running, and the other charges 0.25% upfront and 0.4% running. That's nearly 90% off... for exactly the same thing.

Guess which is which.

 

[archcherub]

the hard truth is, no insurer company is a social enterprise.
they need profits, and dont believe any agents who said it is sooo good that this is a limited offer or etc etc.

Shiny Thing, u are always well loved to bust these many myths.
Im afraid many insurance agents here will hate u more and more....

 

[quarkz]

Thanks for the enlightenment, although I don't really understand everything that was discussed.

 

[Lifeisgreat91]

just get a standard life plan for your baby would be much easier

 

[sweetyethandsome]

Thanks for the enlightenment, although I don't really understand everything that was discussed.

just buy the cheapest term (clue: probably not from the branded insurers) and invest whatever money u have in stocks or ETF (diversifications)