If you have the cash and find that bank’s interest rate pays pittance and investments in most asset classes are fraught with risks, what can you do to park your money to obtain a decent return?
I have decided on SAIL, a single premium endowment plan offered by NTUC Income. It suits my needs for retirement planning. It allows me to save for retirement during the accumulation period and enjoy annual payouts after the accumulation period till age 85 years old or death whichever comes first. It is both an investment and protection plan covering death and total & permanent disability (TPD). The investment portion is to grow your money at a decent rate of return. The rate of return covers both guaranteed portion and non-guaranteed portion which are determined by NTUC Income’s Life Participating Fund’s performance.
Based on an illustration provided by NTUC Income: Mr Lee, age 55, who is in his mid-life phase decides to supplement his retirement income. He signs up for single premium SAIL plan with a single premium of $50,000 and an accumulation period of 10 years. At the end of 10 years, $50,000 becomes $58,601 guaranteed. This is 1.60 per cent return per year guaranteed. If the non-guaranteed portion is included, $50,000 becomes $74,729. This is a return of 4.10 per cent per year.
After the accumulation period, this policy is then converted to an annuity and the annual payout can potentially be $6,092 per year (inclusive of guaranteed and non-guaranteed portions) for the next 20 years. To re-cap, you place $50,000 now and in 10 years’ time, the annual payout is $6,092 per year for next 20 years. This works out to an internal rate of return of 4.61 per cent per year.
The return is decent. At a minimum, you are guaranteed a minimum return of 1.60 per cent per year. If the non-guaranteed portion is included, potentially the return can be as high as 4.61 per cent per year.
Copyright © 2011, limkimtong for Living Investment
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