Need some advice for PRUflexicash

[blue_line]

PruFlexiCash



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Hi all,

I have the above policy with prudential right now and i'm into my 3rd year. Do you think I should terminate my plan? I would lose about $2000+ according to the BI above. Or do you guys think I should continue with the plan?

I sign on to this plan without thinking in the past.

Any inputs will be appreciated.

 

[HandsTied]

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Hi all,

I have the above policy with prudential right now and i'm into my 3rd year. Do you think I should terminate my plan? I would lose about $2000+ according to the BI above. Or do you guys think I should continue with the plan?

I sign on to this plan without thinking in the past.

Any inputs will be appreciated.

**I realised I posted it in the wrong forum. Can the mod help me shift? Thanks!

Even if you hold to maturity, the $2,000 has been incurred largely in distribution costs already. The reason why the maturity is still higher than premiums is because the returns over the years cover up the costs.

Bulk of the costs have been endured already (you can see your original BI for the breakdown per year), so if you are comfortable with the plan (the expected return, some loss of liquidity etc.) it's okay to keep it. If you want to cancel and look for alternatives you should make sure it's worth it, ie. $1,176 per year for the next 23 years should get you at least the same return (with better liquidity) at a similar risk level.

 

[blue_line]

Even if you hold to maturity, the $2,000 has been incurred largely in distribution costs already. The reason why the maturity is still higher than premiums is because the returns over the years cover up the costs.

Bulk of the costs have been endured already (you can see your original BI for the breakdown per year), so if you are comfortable with the plan (the expected return, some loss of liquidity etc.) it's okay to keep it. If you want to cancel and look for alternatives you should make sure it's worth it, ie. $1,176 per year for the next 23 years should get you at least the same return (with better liquidity) at a similar risk level.

Yes, I have paid up $1957 out of the total distribution cost of $2279.

It seems like I am stagnate at the same point 3 years ago as almost all of the premiums that I have paid so far have gone to the distribution cost and very little of it has gone into the 'investment'.

So are you saying that if I can manage the same returns on my own, I would be better off surrendering the policy?

 

[lzydata]

Yes, I have paid up $1957 out of the total distribution cost of $2279.

It seems like I am stagnate at the same point 3 years ago as almost all of the premiums that I have paid so far have gone to the distribution cost and very little of it has gone into the 'investment'.

So are you saying that if I can manage the same returns on my own, I would be better off surrendering the policy?

Given that the rate of return of the Prudential policy upon maturity is (45203/31890)^(1/25)-1 = 1.41% [edit: sorry should be 2.78% because premiums are paid annually over 25 years], I'd say yes, you can definitely do better for such a long period. Heck, your investment will not even beat inflation at that rate. (I understand this policy gives some cashback starting from the 2nd year - not sure if you got any.)

Two downsides I can think of. First, by investing yourself you will be giving up the insurance coverage, as meagre as it is. If you have other policies and/or you are in good health, then it should be OK - you could use some or all of the premium and buy cheaper term insurance for higher coverage or more benefits.

Second, in practice, it is not easy to invest a small sum like $100/month or $1,200/year. You could combine it with other funds to invest in a REIT or high-dividend stock, or bonds, if you are more risk-averse. With a time frame of 25 years, assuming that is the time horizon you have, aim for at least 3%, or 5% if you can stomach some ups and downs.

 

[Financial Guru]

Yes, I have paid up $1957 out of the total distribution cost of $2279.

It seems like I am stagnate at the same point 3 years ago as almost all of the premiums that I have paid so far have gone to the distribution cost and very little of it has gone into the 'investment'.

So are you saying that if I can manage the same returns on my own, I would be better off surrendering the policy?

I did an IRR cashflow analysis on the prudential policy. Yr projected return based on getting $45,203 at the end of the 25th year will result in a return of 2.6% per annum.

You can consider converting yr policy to paid-up where prudential will stop collecting anymore premiums, but yr policy stays in force, though at a much reduced cash value.

You can then divert the premiums to other investments like unit trusts.

 

[evets]

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Hi all,

I have the above policy with prudential right now and i'm into my 3rd year. Do you think I should terminate my plan? I would lose about $2000+ according to the BI above. Or do you guys think I should continue with the plan?

I sign on to this plan without thinking in the past.

Any inputs will be appreciated.

if u need liquidity, u can take out the cash coupon...think of it as a forced saving, its only $300 odd a month...

 

[blue_line]

I did an IRR cashflow analysis on the prudential policy. Yr projected return based on getting $45,203 at the end of the 25th year will result in a return of 2.6% per annum.

You can consider converting yr policy to paid-up where prudential will stop collecting anymore premiums, but yr policy stays in force, though at a much reduced cash value.

You can then divert the premiums to other investments like unit trusts.

what do you mean by converting to paid-up? I don't understand this part.

Can anyone enlighten me?

 

[blue_line]

Given that the rate of return of the Prudential policy upon maturity is (45203/31890)^(1/25)-1 = 1.41%, I'd say yes, you can definitely do better for such a long period. Heck, your investment will not even beat inflation at that rate. (I understand this policy gives some cashback starting from the 2nd year - not sure if you got any.)

Two downsides I can think of. First, by investing yourself you will be giving up the insurance coverage, as meagre as it is. If you have other policies and/or you are in good health, then it should be OK - you could use some or all of the premium and buy cheaper term insurance for higher coverage or more benefits.

Second, in practice, it is not easy to invest a small sum like $100/month or $1,200/year. You could combine it with other funds to invest in a REIT or high-dividend stock, or bonds, if you are more risk-averse. With a time frame of 25 years, assuming that is the time horizon you have, aim for at least 3%, or 5% if you can stomach some ups and downs.

yes. my current plan is to surrender the policy. if only I have done so earlier.

 

[HandsTied]

Yes, I have paid up $1957 out of the total distribution cost of $2279.

It seems like I am stagnate at the same point 3 years ago as almost all of the premiums that I have paid so far have gone to the distribution cost and very little of it has gone into the 'investment'.

So are you saying that if I can manage the same returns on my own, I would be better off surrendering the policy?

If you continue this policy, you are losing some liquidity (money that cannot be withdrawn outside of the Cashback feature), flexibility (freedom to stop investing for a period of time, increase/decrease amount etc.) and some other things like not being able to direct the investment strategy to suit your risk appetite etc. The projected maturity is $45,203 at 5.25% returns before charges.

If you surrender now, you get the cash value of $1,715, and an amount of $1,275.67 per year for the next 22 years (mistaken the annual premium and number of years in my previous post) to put into "something else". If this "something else" is an investment vehicle of similar risk (roughly 30% equities, 50% bonds, 20% property/others of underlying assets the Par fund of the endowment is invested into) but better liquidity and flexibility, and you can get 3.4% pa return (5.25% returns with 1.85% expense ratio) then you would have gotten $45,713.89, which is similar if you continued the policy, but you have gained some advantages like liquidity and flexibility, and lost some things like the small amount of insurance coverage, "bonus smoothing" and arguably fuss-free returns. Of course, if your own investment portfolio outperforms 3.4% after investment charges, you also get better returns than if you stick to your current policy (and vice versa is true: worse off if it performs worse).

In the first place, you may not feel that the endowment suits your risk profile at all. If you have a bigger risk appetite, then you can tailor an investment portfolio that reflects that for potentially better returns. As I have calculated, getting 3.4% pa gains you the same return the endowment will give you if held to maturity (despite the fact that you have already lost money), and anything above 3.4% gains you more.

 

[HandsTied]

yes. my current plan is to surrender the policy. if only I have done so earlier.

And another word of advice from me is that - regardless of whether you continue with your endowment, you should take care of your insurance portfolio first. I am sounding like a broken record, but both personally and professionally, I do not see the point of accumulating wealth before basic coverage is in place. Putting off wealth accumulation does not have as much potential impact as putting off insurance planning does. At a young age, you can be "locking in" your good health with affordable insurance. Even a personal term policy can be more cost-effective than an SAF Group Term policy at this age.

Of course, insurance does not sound as sexy as investing. Oh well, human emotions cloud proper financial planning all the time.

PS: I assume you have not done proper insurance planning because of the sheer likeliness. The average Singaporean is chronically under-insured.

 

[Financial Guru]

what do you mean by converting to paid-up? I don't understand this part.

Can anyone enlighten me?

You have 2 choices if you do not want to continue:

1) Surrender. You'll get back the cash value only, and as mentioned previously will result in up-front losses now, though you can recoup these losses over the medium to long term later with higher yielding investments.

2) Paid-up. Prudential will stop collecting premiums for the remaining 22 years and will keep the policy in force, but the sum assured will be drastically reduced, usually to around the current cash value. In this case, your policy will still continue and accumulate annual bonuses as declared by prudential.

 

[kenneth27]

The first item you need to address is the reason you intend to cancel the policy.

1. Was it because it paidoff to little profit?
2. Was it because you think you can make more money thru grow rich investment?
3. Or was it because you cannot no longer afford it?

On average, your monthly premium work out to be around $106.

Understand clearly that the objective of buying insurance should be an exchange for risk transfer. In the event, death or disability happen to you, your dependent or you are likely to receive the guarantee amount.

My friend was murdered a couple of months ago at the age of 28. News was reported over papers. Our last face-to-face conversation suggested he did not plan for his financial. If he knew this would have happen to him, he may have left an asset for his parent. Hence, insurance can be consider a form of risk transfer or an asset.

Now, fy conideration, is the death payout sufficient? The death or disability paidout is around 16-20K when you reach 25year old. 20,000 is really not alot. A decent funeral would have cost at least 5-10K.

At the age of 25, you probably have completed your NS (For singaporean). Assuming you may have just begin your career, income and saving may be limited. Losing 2000 can be a lot. Do not be tempted to invest. Investment does not guarantee profit. Sometime investment can become a bigger loss.

I do not have the entire Benefit Illustration but afterall the maturity value should at least breakeven for this kind of plan. On top of that, you get some additional interest and protections. You can take this as a initial stepping stone for some small form protection and interests. It isn't that bad. You are just stepping into your 20s.

Moving ahead, you can address your concern with a higher coverage. Again, my piority begins with
1. Hospital and surgery insurance plan. (Refer to MOH.GOV.SG for a comparison chart)
2. Life/Term Insurance for Death and (disability before 65)
3. Critical Illness Coverage
4. Disability (Paidout part of your monthly salary)
5. Saving
6. Investment. (W/o Saving, don't even think about investment)

Finally, thumbs up for you. It is good to always start young.

 

[kenneth27]

You have 2 choices if you do not want to continue:

1) Surrender. You'll get back the cash value only, and as mentioned previously will result in up-front losses now, though you can recoup these losses over the medium to long term later with higher yielding investments.

2) Paid-up. Prudential will stop collecting premiums for the remaining 22 years and will keep the policy in force, but the sum assured will be drastically reduced, usually to around the current cash value. In this case, your policy will still continue and accumulate annual bonuses as declared by prudential.

Option 2 seem to be a very good advice. No idea how does this work? Any form of hidden fees or charges?

 

[Micky Neo]

You have 2 choices if you do not want to continue:

1) Surrender. You'll get back the cash value only, and as mentioned previously will result in up-front losses now, though you can recoup these losses over the medium to long term later with higher yielding investments.

2) Paid-up. Prudential will stop collecting premiums for the remaining 22 years and will keep the policy in force, but the sum assured will be drastically reduced, usually to around the current cash value. In this case, your policy will still continue and accumulate annual bonuses as declared by prudential.

Hi BlueLine,

Your PruflexiCash is an Anticipated Endowment, 25 yrs, annual premium 1276
sum assured would probably be 15K. Assuming all the Cash Benefits are accumulated at current 3%, your returns for this policy will be 2.6%. Of course a regular premium will have higher % but your AE comes with flexibility to withdraw your CBs and your basic sum assured won't be affected in the event of claim.

Unless you need urgent funds, or can make better use of future premiums, it's good to keep the policy.

1) Surrender - You can call up Pru customer service @ 1800 333 0333 to enquire on your current surrender value.

2) Paid up - You can use the surrender value aka cash value above to convert to premium free paid up policy. The new death benefits will be the paid up value.
I believe your policy was taken up in 08, thus the series 6. The paid up value will take into consideration of the accrued bonus, and no more bonus will be added.
Riders, if any, will be dropped off too. Call them to enquire (they are always listening)
(Only series 3,4 will continue to add RB)

3) Transfer the policy ownership (Sell)
I'm in acquisition and redistribution of resale endowment policies, however we only take in policy that has completed a third of its term or in force for 5 yrs.
You can transfer the policy to your family and friends or any third party and entities for an agreed consideration (if any).

Regards
Micky Neo

 

[kenneth27]

Option 1 & 2 stated above are alternatives. Regardless, you still lose your $2000+.

Option 3 - After 5 years later, does he lose the $2000+ after resales value? Any fees or hidden charges for transfer of ownership?

Nonetheless, saving interest earn in insurance are higher than the bank.

(Btw, I am not a agent but a IT person working in a 5* hospitality chain.

 

[Micky Neo]

Option 1 & 2 stated above are alternatives. Regardless, you still lose your $2000+.

Option 3 - After 5 years later, does he lose the $2000+ after resales value? Any fees or hidden charges for transfer of ownership?

Nonetheless, saving interest earn in insurance are higher than the bank.

(Btw, I am not a agent but a IT person working in a 5* hospitality chain.

Expand briefly on transfer on policy ownership.
Life insurance policies are personal assets and are transferable and can be sold.
Transfer of ownership fall under the rights of policyowner and is a personal decision.
It can be a gift (parent to a child) or sale transaction.

It's all in the agreed transaction price and no other charges.
The factors considered for the valuation includes:
Which Insurer, what type of policy, in force for how many yrs, how many yrs remaining etc. Bottom line, it has to be above Insurer's surrender value.

I have come across income policy with the surrender value break even with the total premium paid at about one third of policy term. Of course the policy will be sold above the surrender value.

 

[kenneth27]

Illumination! Thank you. Indeed a better option rarely explained to layman.

 

[chyn_no]

anyone bought prudential- pruflexicash

Hi guys, recently was introduce to this product. anyone already sign up for this ? any feedback or review?

 

[blue_line]

i cancelled it after 3 years.

 

[matchy]

depend on ur need and wat u wan